Loss-Making Group 6 Metals Limited (ASX:G6M) Expected To Breakeven In The Medium-Term

With the business potentially at an important milestone, we thought we'd take a closer look at Group 6 Metals Limited's (ASX:G6M) future prospects. Group 6 Metals Limited operates in the mining industry. With the latest financial year loss of AU$22m and a trailing-twelve-month loss of AU$17m, the AU$54m market-cap company alleviated its loss by moving closer towards its target of breakeven. The most pressing concern for investors is Group 6 Metals' path to profitability – when will it breakeven? We've put together a brief outline of industry analyst expectations for the company, its year of breakeven and its implied growth rate.

See our latest analysis for Group 6 Metals

According to some industry analysts covering Group 6 Metals, breakeven is near. They anticipate the company to incur a final loss in 2024, before generating positive profits of AU$32m in 2025. So, the company is predicted to breakeven just over a year from today. How fast will the company have to grow each year in order to reach the breakeven point by 2025? Working backwards from analyst estimates, it turns out that they expect the company to grow 86% year-on-year, on average, which is rather optimistic! If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.

We're not going to go through company-specific developments for Group 6 Metals given that this is a high-level summary, but, bear in mind that typically 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. This means that a high growth rate is not unusual, especially if the company is currently in an investment period.

Before we wrap up, there’s one issue worth mentioning. Group 6 Metals currently has a relatively high level of debt. Typically, debt shouldn’t exceed 40% of your equity, which in Group 6 Metals' case is 80%. Note that a higher debt obligation increases the risk in investing in the loss-making company.

Next Steps:

There are too many aspects of Group 6 Metals to cover in one brief article, but the key fundamentals for the company can all be found in one place – Group 6 Metals' company page on Simply Wall St. We've also compiled a list of relevant aspects you should look at:

1. Valuation: What is Group 6 Metals worth today? Has the future growth potential already been factored into the price? The intrinsic value infographic in our free research report helps visualize whether Group 6 Metals is currently mispriced by the market.
2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Group 6 Metals’s board and the CEO’s background.
3. 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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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.