Chaarat Gold Holdings Limited’s (LON:CGH) Path To Profitability

Chaarat Gold Holdings Limited’s (LON:CGH): Chaarat Gold Holdings Limited owns, operates, and explores for gold deposits. The company’s loss has recently broadened since it announced a -US$17.0m loss in the full financial year, compared to the latest trailing-twelve-month loss of -US$24.3m, moving it further away from breakeven. Many investors are wondering the rate at which CGH will turn a profit, with the big question being “when will the company breakeven?” I’ve put together a brief outline of industry analyst expectations for CGH, its year of breakeven and its implied growth rate.

View our latest analysis for Chaarat Gold Holdings

According to the 3 industry analysts covering CGH, the consensus is breakeven is near. They expect the company to post a final loss in 2019, before turning a profit of US$5.5m in 2020. Therefore, CGH is expected to breakeven roughly a couple of months from now! In order to meet this breakeven date, I calculated the rate at which CGH must grow year-on-year. It turns out an average annual growth rate of 65% is expected, which is rather optimistic! Should the business grow at a slower rate, it will become profitable at a later date than expected.

AIM:CGH Past and Future Earnings, September 16th 2019
AIM:CGH Past and Future Earnings, September 16th 2019

Underlying developments driving CGH’s growth isn’t the focus of this broad overview, though, take into account that typically metals and mining companies, depending on the stage of operation and metals mined, have irregular periods of cash flow. This means, large upcoming growth rates are not abnormal as the company is beginning to reap the benefits of earlier investments.

One thing I would like to bring into light with CGH is its debt-to-equity ratio of over 2x. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, and CGH has considerably exceeded this. A higher level of debt requires more stringent capital management which increases the risk around investing in the loss-making company.

Next Steps:

There are too many aspects of CGH to cover in one brief article, but the key fundamentals for the company can all be found in one place – CGH’s company page on Simply Wall St. I’ve also compiled a list of key aspects you should further examine:

  1. Historical Track Record: What has CGH’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.
  2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Chaarat Gold Holdings’s board and the CEO’s back ground.
  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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.