American Pacific Borates Limited’s (ASX:ABR): American Pacific Borates Limited engages in the exploration and development of mineral properties in Australia and the United States. On 30 June 2019, the AU$106m market-cap posted a loss of -AU$3.0m for its most recent financial year. The most pressing concern for investors is ABR’s path to profitability – when will it breakeven? In this article, I will touch on the expectations for ABR’s growth and when analysts expect the company to become profitable.
According to the industry analysts covering ABR, breakeven is near. They anticipate the company to incur a final loss in 2021, before generating positive profits of AU$1.2m in 2022. Therefore, ABR is expected to breakeven roughly 2 years from now. How fast will ABR have to grow each year in order to reach the breakeven point by 2022? Working backwards from analyst estimates, it turns out that they expect the company to grow 40% year-on-year, on average, which signals high confidence from analysts. If this rate turns out to be too aggressive, ABR may become profitable much later than analysts predict.
I’m not going to go through company-specific developments for ABR given that this is a high-level summary, though, keep in mind that by and large a metal and mining business has lumpy cash flows which are contingent on the natural resource mined and stage at which the company is operating. So, a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.
One thing I’d like to point out is that ABR has no debt on its balance sheet, which is rare for a loss-making metals and mining company, which usually has a high level of debt relative to its equity. ABR currently operates purely off its shareholder funding and has no debt obligation, reducing concerns around repayments and making it a less risky investment.
This article is not intended to be a comprehensive analysis on ABR, so if you are interested in understanding the company at a deeper level, take a look at ABR’s company page on Simply Wall St. I’ve also compiled a list of essential factors you should look at:
- Historical Track Record: What has ABR’s performance been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
- Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on American Pacific Borates’s board and the CEO’s back ground.
- Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
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