Metro Mining Limited (ASX:MMI) Has Found A Path To Profitability

We feel now is a pretty good time to analyse Metro Mining Limited's (ASX:MMI) business as it appears the company may be on the cusp of a considerable accomplishment. Metro Mining Limited, together with its subsidiaries, operates as an exploration and mining company in China. The company’s loss has recently broadened since it announced a AU$13m loss in the full financial year, compared to the latest trailing-twelve-month loss of AU$34m, moving it further away from breakeven. The most pressing concern for investors is Metro Mining's path to profitability – when will it breakeven? We've put together a brief outline of industry analyst expectations for the company, its year of breakeven and its implied growth rate.

Check out our latest analysis for Metro Mining

According to the 2 industry analysts covering Metro Mining, the consensus is that breakeven is near. They expect the company to post a final loss in 2023, before turning a profit of AU$17m in 2024. Therefore, the company is expected to breakeven roughly 12 months from now or less. At what rate will the company have to grow in order to realise the consensus estimates forecasting breakeven in under 12 months? Using a line of best fit, we calculated an average annual growth rate of 31%, which signals high confidence from analysts. Should the business grow at a slower rate, it will become profitable at a later date than expected.

Underlying developments driving Metro Mining's growth isn’t the focus of this broad overview, however, bear in mind 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.

One thing we would like to bring into light with Metro Mining is its debt-to-equity ratio of over 2x. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, and the company has considerably exceeded this. A higher level of debt requires more stringent capital management which increases the risk around investing in the loss-making company.

Next Steps:

There are too many aspects of Metro Mining to cover in one brief article, but the key fundamentals for the company can all be found in one place – Metro Mining's company page on Simply Wall St. We've also compiled a list of relevant factors you should look at:

1. Valuation: What is Metro Mining 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 Metro Mining 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 Metro Mining’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.