Stock Analysis

Loss-Making Mincor Resources NL (ASX:MCR) Expected To Breakeven In The Medium-Term

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ASX:MCR
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With the business potentially at an important milestone, we thought we'd take a closer look at Mincor Resources NL's (ASX:MCR) future prospects. Mincor Resources NL engages in the exploration, development, and mining of mineral resources in Australia. On 30 June 2020, the AU$475m market-cap company posted a loss of AU$14m for its most recent financial year. Many investors are wondering about the rate at which Mincor Resources will turn a profit, with the big question being “when will the company breakeven?” In this article, we will touch on the expectations for the company's growth and when analysts expect it to become profitable.

See our latest analysis for Mincor Resources

Consensus from 2 of the Australian Metals and Mining analysts is that Mincor Resources is on the verge of breakeven. They anticipate the company to incur a final loss in 2021, before generating positive profits of AU$12m in 2022. So, the company is predicted to breakeven approximately 2 years from now. How fast will the company have to grow each year in order to reach the breakeven point by 2022? Working backwards from analyst estimates, it turns out that they expect the company to grow 54% 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.

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ASX:MCR Earnings Per Share Growth December 25th 2020

We're not going to go through company-specific developments for Mincor Resources given that this is a high-level summary, though, bear in mind 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. Mincor 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 key fundamentals of Mincor Resources 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 Mincor Resources, take a look at Mincor Resources' company page on Simply Wall St. We've also compiled a list of pertinent aspects you should further examine:

  1. Valuation: What is Mincor 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 Mincor 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 Mincor 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.

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