We feel now is a pretty good time to analyse Capricorn Metals Ltd's (ASX:CMM) business as it appears the company may be on the cusp of a considerable accomplishment. Capricorn Metals Ltd engages in the mineral exploration and project evaluation business in Australia and Madagascar. The AU$693m market-cap company’s loss lessened since it announced a AU$13m loss in the full financial year, compared to the latest trailing-twelve-month loss of AU$8.1m, as it approaches breakeven. The most pressing concern for investors is Capricorn Metals' path to profitability – when will it breakeven? We've put together a brief outline of industry analyst expectations for the company, its year of breakeven and its implied growth rate.
Consensus from 3 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$77m in 2022. So, the company is predicted to breakeven just over a year from today. 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 107%, which is rather optimistic! If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.
Given this is a high-level overview, we won’t go into details of Capricorn Metals' upcoming projects, though, bear in mind that generally 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. The company has managed its capital prudently, with debt making up 1.9% of equity. This means that it has predominantly funded its operations from equity capital, and its low debt obligation reduces the risk around investing in the loss-making company.
This article is not intended to be a comprehensive analysis on Capricorn Metals, so if you are interested in understanding the company at a deeper level, take a look at Capricorn Metals' company page on Simply Wall St. We've also put together a list of key factors you should further examine:
- Valuation: What is Capricorn 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 Capricorn Metals is currently mispriced by the market.
- Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Capricorn Metals’s board and the CEO’s background.
- 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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