Andromeda Metals Limited (ASX:ADN): Are Analysts Optimistic?

With the business potentially at an important milestone, we thought we'd take a closer look at Andromeda Metals Limited's (ASX:ADN) future prospects. Andromeda Metals Limited, together with its subsidiaries, operates as a mineral exploration company in Australia. The AU$591m market-cap company announced a latest loss of AU$3.4m on 30 June 2020 for its most recent financial year result. As path to profitability is the topic on Andromeda Metals' investors mind, we've decided to gauge market sentiment. We've put together a brief outline of industry analyst expectations for the company, its year of breakeven and its implied growth rate.

Check out our latest analysis for Andromeda Metals

According to some industry analysts covering Andromeda Metals, breakeven is near. They anticipate the company to incur a final loss in 2021, before generating positive profits of AU$3.6m in 2022. The company is therefore projected to breakeven just over a year from now. What rate will the company have to grow year-on-year in order to breakeven on this date? Using a line of best fit, we calculated an average annual growth rate of 57%, which is extremely buoyant. 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 Andromeda Metals given that this is a high-level summary, but, take into account 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. This means that a high growth rate is not unusual, especially if the company is currently in an investment period.

One thing we’d like to point out is that Andromeda Metals has no debt on its balance sheet, which is quite unusual for a cash-burning metals and mining company, which usually has a high level of debt relative to its equity. The company currently operates purely off its shareholder funding and has no debt obligation, reducing concerns around repayments and making it a less risky investment.

Next Steps:

There are key fundamentals of Andromeda Metals which are not covered in this article, but we must stress again that this is merely a basic overview. For a more comprehensive look at Andromeda Metals, take a look at Andromeda Metals' company page on Simply Wall St. We've also put together a list of pertinent aspects you should further research:

1. Valuation: What is Andromeda 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 Andromeda 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 Andromeda 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. 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.
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