Capricorn Metals Ltd (ASX:CMM) Is Expected To Breakeven In The Near Future

Capricorn Metals Ltd (ASX:CMM) is possibly approaching a major achievement in its business, so we would like to shine some light on the company. Capricorn Metals Ltd engages in the mineral exploration and project evaluation business in Australia and Madagascar. On 30 June 2020, the AU$614m market-cap company posted a loss of AU$13m for its most recent financial year. The most pressing concern for investors is Capricorn Metals' path to profitability – when will it breakeven? 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 Capricorn Metals

Consensus from 2 of the Australian Metals and Mining analysts is that Capricorn Metals is on the verge of breakeven. They anticipate the company to incur a final loss in 2021, before generating positive profits of AU$103m in 2022. Therefore, the company is expected to breakeven just over a year from today. How fast will the company have to grow each year in order to reach the breakeven point by 2022? Working backwards from analyst estimates, it turns out that they expect the company to grow 131% year-on-year, on average, which is rather optimistic! 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 Capricorn Metals given that this is a high-level summary, 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.

Before we wrap up, there’s one aspect worth mentioning. Capricorn Metals currently has no debt on its balance sheet, which is rare for a loss-making 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 Capricorn Metals to cover in one brief article, but the key fundamentals for the company can all be found in one place – Capricorn Metals' company page on Simply Wall St. We've also compiled a list of essential factors you should further examine:

1. Historical Track Record: What has Capricorn Metals' 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 Capricorn Metals' 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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