Stock Analysis

Latin Resources Limited (ASX:LRS): Are Analysts Optimistic?

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We feel now is a pretty good time to analyse Latin Resources Limited's (ASX:LRS) business as it appears the company may be on the cusp of a considerable accomplishment. Latin Resources Limited engages in the exploration and evaluation of mining projects in Australia, Brazil, Peru, and Argentina. The company’s loss has recently broadened since it announced a AU$4.4m loss in the full financial year, compared to the latest trailing-twelve-month loss of AU$6.1m, moving it further away from breakeven. The most pressing concern for investors is Latin Resources' path to profitability – when will it breakeven? Below we will provide a high-level summary of the industry analysts’ expectations for the company.

Check out our latest analysis for Latin Resources

Latin Resources is bordering on breakeven, according to the 3 Australian Metals and Mining analysts. They expect the company to post a final loss in 2024, before turning a profit of AU$23m in 2025. 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 2025? Working backwards from analyst estimates, it turns out that they expect the company to grow 70% 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.

ASX:LRS Earnings Per Share Growth March 25th 2023

Given this is a high-level overview, we won’t go into details of Latin Resources' upcoming projects, but, take into account that generally 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. So, a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.

Before we wrap up, there’s one aspect worth mentioning. Latin Resources 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 the company 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 Latin Resources to cover in one brief article, but the key fundamentals for the company can all be found in one place – Latin Resources' company page on Simply Wall St. We've also compiled a list of relevant factors you should further research:

  1. Valuation: What is Latin Resources 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 Latin Resources 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 Latin Resources’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.

Valuation is complex, but we're helping make it simple.

Find out whether Latin Resources is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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