With the business potentially at an important milestone, we thought we'd take a closer look at Strandline Resources Limited's (ASX:STA) future prospects. Strandline Resources Limited, together with its subsidiaries, engages in the exploration and evaluation of mineral sands, and other base metal resources in Australia and Tanzania. On 30 June 2020, the AU$105m market-cap company posted a loss of AU$8.1m for its most recent financial year. As path to profitability is the topic on Strandline Resources' investors mind, we've decided to gauge market sentiment. We've put together a brief outline of industry analyst expectations for the company, its year of breakeven and its implied growth rate.
Strandline Resources is bordering on breakeven, according to the 3 Australian Metals and Mining analysts. They anticipate the company to incur a final loss in 2022, before generating positive profits of AU$36m in 2023. So, the company is predicted to breakeven approximately 2 years from now. What rate will the company have to grow year-on-year in order to breakeven on this date? Using a line of best fit, we calculated an average annual growth rate of 56%, which is extremely buoyant. Should the business grow at a slower rate, it will become profitable at a later date than expected.
Underlying developments driving Strandline Resources' growth isn’t the focus of this broad overview, though, take into account 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. So, a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.
One thing we’d like to point out is that Strandline Resources has no debt on its balance sheet, which is rare for a loss-making 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.
This article is not intended to be a comprehensive analysis on Strandline Resources, so if you are interested in understanding the company at a deeper level, take a look at Strandline Resources' company page on Simply Wall St. We've also compiled a list of essential aspects you should look at:
- Valuation: What is Strandline 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 Strandline Resources is currently mispriced by the market.
- Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Strandline Resources’s board and the CEO’s background.
- 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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