Kalium Lakes Limited (ASX:KLL): When Will It Breakeven?

Kalium Lakes Limited (ASX:KLL) is possibly approaching a major achievement in its business, so we would like to shine some light on the company. Kalium Lakes Limited operates as an exploration and development company in Western Australia. The AU$168m market-cap company’s loss lessened since it announced a AU$19m loss in the full financial year, compared to the latest trailing-twelve-month loss of AU$6.4m, as it approaches breakeven. As path to profitability is the topic on Kalium Lakes' investors mind, we've decided to gauge market sentiment. Below we will provide a high-level summary of the industry analysts’ expectations for the company.

See our latest analysis for Kalium Lakes

Consensus from 2 of the Australian Chemicals analysts is that Kalium Lakes is on the verge of breakeven. They anticipate the company to incur a final loss in 2022, before generating positive profits of AU$10m in 2023. The company is therefore projected to breakeven around 2 years from now. 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 75%, 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 Kalium Lakes' growth isn’t the focus of this broad overview, though, keep in mind that generally a high forecast growth rate is not unusual for a company that is currently undergoing an investment period.

One thing we would like to bring into light with Kalium Lakes is its relatively high level of debt. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, which in Kalium Lakes' case is 87%. A higher level of debt requires more stringent capital management which increases the risk around investing in the loss-making company.

Next Steps:

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

1. Valuation: What is Kalium Lakes 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 Kalium Lakes 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 Kalium Lakes’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. 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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