Queensland Pacific Metals Limited's (ASX:QPM) Shift From Loss To Profit

Queensland Pacific Metals Limited (ASX:QPM) is possibly approaching a major achievement in its business, so we would like to shine some light on the company. Queensland Pacific Metals Limited focuses on the production of metals for the emerging lithium-ion battery and electric vehicle sector. With the latest financial year loss of AU$39m and a trailing-twelve-month loss of AU$51m, the AU$83m market-cap company amplified its loss by moving further away from its breakeven target. Many investors are wondering about the rate at which Queensland Pacific Metals 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.

Check out our latest analysis for Queensland Pacific Metals

According to some industry analysts covering Queensland Pacific Metals, breakeven is near. They anticipate the company to incur a final loss in 2024, before generating positive profits of AU$33m in 2025. So, the company is predicted to breakeven just over a year 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 111% year-on-year, on average, which signals high confidence from analysts. If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.

We're not going to go through company-specific developments for Queensland Pacific Metals given that this is a high-level summary, however, keep in mind that typically 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.

Before we wrap up, there’s one issue worth mentioning. Queensland Pacific Metals currently has a debt-to-equity ratio of 174%. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, which in this case, the company has significantly overshot. Note that a higher debt obligation increases the risk in investing in the loss-making company.

Next Steps:

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

1. Valuation: What is Queensland Pacific Metals 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 Queensland Pacific Metals 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 Queensland Pacific Metals’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.