Adriatic Metals PLC (ASX:ADT) Has Found A Path To Profitability

With the business potentially at an important milestone, we thought we'd take a closer look at Adriatic Metals PLC's (ASX:ADT) future prospects. Adriatic Metals PLC, through its subsidiaries, engages in the exploration and development of precious and base metals. With the latest financial year loss of US$47m and a trailing-twelve-month loss of US$48m, the AU$1.0b market-cap company amplified its loss by moving further away from its breakeven target. Many investors are wondering about the rate at which Adriatic Metals will turn a profit, with the big question being “when will the company breakeven?” Below we will provide a high-level summary of the industry analysts’ expectations for the company.

View our latest analysis for Adriatic Metals

Adriatic Metals is bordering on breakeven, according to the 5 Australian Metals and Mining analysts. They anticipate the company to incur a final loss in 2023, before generating positive profits of US$8.9m in 2024. The company is therefore projected to breakeven around 12 months from now or less. At what rate will the company have to grow in order to realise the consensus estimates forecasting breakeven in under 12 months? Using a line of best fit, we calculated an average annual growth rate of 85%, which signals high confidence from analysts. Should the business grow at a slower rate, it will become profitable at a later date than expected.

Given this is a high-level overview, we won’t go into details of Adriatic Metals' upcoming projects, though, bear in mind that by and large metals and mining companies, depending on the stage of operation and metals mined, have irregular periods of cash flow. So, a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.

Before we wrap up, there’s one issue worth mentioning. Adriatic Metals currently has a debt-to-equity ratio of 140%. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, and the company 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 key fundamentals of Adriatic 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 Adriatic Metals, take a look at Adriatic Metals' company page on Simply Wall St. We've also compiled a list of essential factors you should further examine:

1. Valuation: What is Adriatic 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 Adriatic 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 Adriatic 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.