European Lithium Limited (ASX:EUR): Are Analysts Optimistic?

We feel now is a pretty good time to analyse European Lithium Limited's (ASX:EUR) business as it appears the company may be on the cusp of a considerable accomplishment. European Lithium Limited engages in the exploration and development of lithium deposits in Australia and Austria. The company’s loss has recently broadened since it announced a AU$206m loss in the full financial year, compared to the latest trailing-twelve-month loss of AU$221m, moving it further away from breakeven. As path to profitability is the topic on European Lithium's 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.

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European Lithium is bordering on breakeven, according to some Australian Metals and Mining analysts. They expect the company to post a final loss in 2027, before turning a profit of AU$107m in 2028. Therefore, the company is expected to breakeven roughly 3 years from today. How fast will the company have to grow each year in order to reach the breakeven point by 2028? Working backwards from analyst estimates, it turns out that they expect the company to grow 80% year-on-year, on average, which signals high confidence from analysts. Should the business grow at a slower rate, it will become profitable at a later date than expected.

We're not going to go through company-specific developments for European Lithium given that this is a high-level summary, but, take into account 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, large upcoming growth rates are not abnormal as the company is beginning to reap the benefits of earlier investments.

See our latest analysis for European Lithium

One thing we’d like to point out is that The company has managed its capital prudently, with debt making up 1.2% 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.

Next Steps:

This article is not intended to be a comprehensive analysis on European Lithium, so if you are interested in understanding the company at a deeper level, take a look at European Lithium's company page on Simply Wall St. We've also compiled a list of important factors you should further examine:

1. Valuation: What is European Lithium 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 European Lithium 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 European Lithium’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.