When Will Tri-Star Resources plc (LON:TSTR) Turn A Profit?

Tri-Star Resources plc’s (LON:TSTR): Tri-Star Resources Plc engages in the exploration, mining, and processing of minerals. With the latest financial year loss of -UK£5.9m and a trailing-twelve month of -UK£1.6m, the UK£37m market-cap alleviates its loss by moving closer towards its target of breakeven. The most pressing concern for investors is TSTR’s path to profitability – when will it breakeven? Below I will provide a high-level summary of the industry analysts’ expectations for TSTR.

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Expectation from Metals and Mining analysts is TSTR is on the verge of breakeven. They anticipate the company to incur a final loss in 2019, before generating positive profits of UK£11m in 2020. Therefore, TSTR is expected to breakeven roughly a couple of months from now! How fast will TSTR have to grow each year in order to reach the breakeven point by 2020? Working backwards from analyst estimates, it turns out that they expect the company to grow 134% year-on-year, on average, which is extremely buoyant. If this rate turns out to be too aggressive, TSTR may become profitable much later than analysts predict.

AIM:TSTR Past Future Earnings January 11th 19
AIM:TSTR Past Future Earnings January 11th 19

Given this is a high-level overview, I won’t go into details of TSTR’s upcoming projects, though, take into account 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.

One thing I would like to bring into light with TSTR is its relatively high level of debt. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, which in TSTR’s case is 47%. A higher level of debt requires more stringent capital management which increases the risk around investing in the loss-making company.

Next Steps:

This article is not intended to be a comprehensive analysis on TSTR, so if you are interested in understanding the company at a deeper level, take a look at TSTR’s company page on Simply Wall St. I’ve also compiled a list of pertinent factors you should further research:

  1. Historical Track Record: What has TSTR’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 Tri-Star Resources’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.

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.