Australian Rare Earths Limited (ASX:AR3) Is Expected To Breakeven In The Near Future

With the business potentially at an important milestone, we thought we'd take a closer look at Australian Rare Earths Limited's (ASX:AR3) future prospects. Australian Rare Earths Limited engages in the exploration and development of rare earths mineral resource opportunities in Australia. On 30 June 2023, the AU$18m market-cap company posted a loss of AU$2.4m for its most recent financial year. As path to profitability is the topic on Australian Rare Earths' investors mind, we've decided to gauge market sentiment. In this article, we will touch on the expectations for the company's growth and when analysts expect it to become profitable.

Check out our latest analysis for Australian Rare Earths

According to some industry analysts covering Australian Rare Earths, breakeven is near. They expect the company to post a final loss in 2025, before turning a profit of AU$3.1m in 2026. Therefore, the company is expected to breakeven roughly 2 years from today. In order to meet this breakeven date, we calculated the rate at which the company must grow year-on-year. It turns out an average annual growth rate of 22% is expected, which signals high confidence from analysts. 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 Australian Rare Earths given that this is a high-level summary, but, keep in mind 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.

Before we wrap up, there’s one aspect worth mentioning. Australian Rare Earths currently 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 too many aspects of Australian Rare Earths to cover in one brief article, but the key fundamentals for the company can all be found in one place – Australian Rare Earths' company page on Simply Wall St. We've also put together a list of key factors you should further examine:

1. Historical Track Record: What has Australian Rare Earths' 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 Australian Rare Earths' 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.