New Century Resources Limited's (ASX:NCZ) Has Found A Path To Profitability

We feel now is a pretty good time to analyse New Century Resources Limited's (ASX:NCZ) business as it appears the company may be on the cusp of a considerable accomplishment. New Century Resources Limited operates as a base metal development and production company in Australia and the United States. On 30 June 2020, the AU$184m market-cap company posted a loss of AU$8.1m for its most recent financial year. Many investors are wondering about the rate at which New Century Resources will turn a profit, with the big question being “when will the company breakeven?” Below we will provide a high-level summary of the industry analysts’ expectations for the company.

View our latest analysis for New Century Resources

According to the 2 industry analysts covering New Century Resources, the consensus is that breakeven is near. They expect the company to post a final loss in 2020, before turning a profit of AU$31m in 2021. Therefore, the company is expected to breakeven roughly a year 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 109%, which is extremely buoyant. Should the business grow at a slower rate, it will become profitable at a later date than expected.

We're not going to go through company-specific developments for New Century Resources given that this is a high-level summary, though, 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 would like to bring into light with New Century Resources is its debt-to-equity ratio of 173%. 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 in investing in the loss-making company.

Next Steps:

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

1. Valuation: What is New Century 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 New Century 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 New Century 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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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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