When Will Core Lithium Ltd. (ASX:CXO) Breakeven?

Core Lithium Ltd.’s (ASX:CXO): Core Lithium Ltd. engages in the exploration for lithium and base metals deposits in Northern Territory and South Australia. The AU$31m market-cap posted a loss in its most recent financial year of -AU$2.1m and a latest trailing-twelve-month loss of -AU$1.8m shrinking the gap between loss and breakeven. As path to profitability is the topic on CXO’s investors mind, I’ve decided to gauge market sentiment. Below I will provide a high-level summary of the industry analysts’ expectations for CXO.

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View our latest analysis for Core Lithium

CXO is bordering on breakeven, according to Metals and Mining analysts. They expect the company to post a final loss in 2020, before turning a profit of AU$26m in 2021. CXO is therefore projected to breakeven around 2 years from now. How fast will CXO have to grow each year in order to reach the breakeven point by 2021? Working backwards from analyst estimates, it turns out that they expect the company to grow 46% year-on-year, on average, which signals high confidence from analysts. If this rate turns out to be too aggressive, CXO may become profitable much later than analysts predict.

ASX:CXO Past and Future Earnings, May 23rd 2019
ASX:CXO Past and Future Earnings, May 23rd 2019

Given this is a high-level overview, I won’t go into details of CXO’s upcoming projects, however, 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. This means that a high growth rate is not unusual, especially if the company is currently in an investment period.

Before I wrap up, there’s one aspect worth mentioning. CXO currently has no debt on its balance sheet, which is quite unusual for a cash-burning metals and mining company, which typically has high debt relative to its equity. This means that CXO has been operating purely on its equity investment and has no debt burden. This aspect reduces the risk around investing in the loss-making company.

Next Steps:

There are too many aspects of CXO to cover in one brief article, but the key fundamentals for the company can all be found in one place – CXO’s company page on Simply Wall St. I’ve also compiled a list of relevant aspects you should further research:

  1. Historical Track Record: What has CXO’s 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 Core Lithium’s board and the CEO’s back ground.
  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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.