Market Sentiment Around Loss-Making Pilbara Minerals Limited (ASX:PLS)

Pilbara Minerals Limited’s (ASX:PLS): Pilbara Minerals Limited engages in the exploration, development, and operation of mineral resources in Australia. The AU$667m market-cap company announced a latest loss of -AU$28.9m on 30 June 2019 for its most recent financial year result. The most pressing concern for investors is PLS’s path to profitability – when will it breakeven? I’ve put together a brief outline of industry analyst expectations for PLS, its year of breakeven and its implied growth rate.

View our latest analysis for Pilbara Minerals

PLS is bordering on breakeven, according to the 6 Metals and Mining analysts. They anticipate the company to incur a final loss in 2020, before generating positive profits of AU$60m in 2021. PLS is therefore projected to breakeven around 2 years from today. In order to meet this breakeven date, I calculated the rate at which PLS must grow year-on-year. It turns out an average annual growth rate of 90% is expected, which signals high confidence from analysts. Should the business grow at a slower rate, it will become profitable at a later date than expected.

ASX:PLS Past and Future Earnings, December 3rd 2019
ASX:PLS Past and Future Earnings, December 3rd 2019

Underlying developments driving PLS’s growth isn’t the focus of this broad overview, 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. 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 PLS has managed its capital prudently, with debt making up 36% of equity. This means that PLS has predominantly funded its operations from equity capital,and its low debt obligation reduces the risk around investing in the loss-making company.

Next Steps:

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

  1. Valuation: What is PLS 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 PLS 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 Pilbara Minerals’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.

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.

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