When Will Eagle Mountain Mining Limited (ASX:EM2) Turn A Profit?

We feel now is a pretty good time to analyse Eagle Mountain Mining Limited's (ASX:EM2) business as it appears the company may be on the cusp of a considerable accomplishment. Eagle Mountain Mining Limited, together with its subsidiaries, engages in the exploration of mineral resources in Australia and the United States. With the latest financial year loss of AU$14m and a trailing-twelve-month loss of AU$9.3m, the AU$22m market-cap company alleviated its loss by moving closer towards its target of breakeven. The most pressing concern for investors is Eagle Mountain Mining's 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.

Check out our latest analysis for Eagle Mountain Mining

Eagle Mountain Mining is bordering on breakeven, according to some Australian Metals and Mining analysts. They anticipate the company to incur a final loss in 2025, before generating positive profits of AU$36m in 2026. The company is therefore projected to breakeven around 2 years from today. How fast will the company have to grow each year in order to reach the breakeven point by 2026? Working backwards from analyst estimates, it turns out that they expect the company to grow 107% year-on-year, on average, which is extremely buoyant. If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.

Underlying developments driving Eagle Mountain Mining's growth isn’t the focus of this broad overview, though, bear 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.

One thing we would like to bring into light with Eagle Mountain Mining is its debt-to-equity ratio of over 2x. Typically, debt shouldn’t exceed 40% of your equity, which in this case, the company has significantly overshot. A higher level of debt requires more stringent capital management which increases the risk in investing in the loss-making company.

Next Steps:

There are key fundamentals of Eagle Mountain Mining 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 Eagle Mountain Mining, take a look at Eagle Mountain Mining's company page on Simply Wall St. We've also compiled a list of relevant factors you should further examine:

1. Valuation: What is Eagle Mountain Mining 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 Eagle Mountain Mining 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 Eagle Mountain Mining’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.