Lunnon Metals Limited's (ASX:LM8) Shift From Loss To Profit

We feel now is a pretty good time to analyse Lunnon Metals Limited's (ASX:LM8) business as it appears the company may be on the cusp of a considerable accomplishment. Lunnon Metals Limited focuses on the exploration and development of nickel and gold in Australia. With the latest financial year loss of AU$6.6m and a trailing-twelve-month loss of AU$14m, the AU$172m market-cap company amplified its loss by moving further away from its breakeven target. As path to profitability is the topic on Lunnon Metals' investors mind, we've decided to gauge market sentiment. We've put together a brief outline of industry analyst expectations for the company, its year of breakeven and its implied growth rate.

See our latest analysis for Lunnon Metals

According to some industry analysts covering Lunnon Metals, breakeven is near. They anticipate the company to incur a final loss in 2024, before generating positive profits of AU$50m in 2025. Therefore, the company is expected to breakeven roughly 2 years from now. In order to meet this breakeven date, we calculated the rate at which the company must grow year-on-year. It turns out an average annual growth rate of 123% is expected, 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 Lunnon Metals' growth isn’t the focus of this broad overview, but, take into account that generally metals and mining companies, depending on the stage of operation and metals mined, have irregular periods of cash flow. This means, large upcoming growth rates are not abnormal as the company is beginning to reap the benefits of earlier investments.

One thing we’d like to point out is that Lunnon Metals has no debt on its balance sheet, which is rare for a loss-making metals and mining company, which usually has a high level of debt relative to its equity. The company currently operates purely off its shareholder funding and has no debt obligation, reducing concerns around repayments and making it a less risky investment.

Next Steps:

This article is not intended to be a comprehensive analysis on Lunnon Metals, so if you are interested in understanding the company at a deeper level, take a look at Lunnon Metals' company page on Simply Wall St. We've also put together a list of important aspects you should look at:

1. Historical Track Record: What has Lunnon Metals' 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 Lunnon Metals' 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.