VHM Limited (ASX:VHM): Are Analysts Optimistic?

We feel now is a pretty good time to analyse VHM Limited's (ASX:VHM) business as it appears the company may be on the cusp of a considerable accomplishment. VHM Limited engages in the exploration and development of mineral properties in Australia. The AU$122m market-cap company announced a latest loss of AU$18m on 30 June 2023 for its most recent financial year result. Many investors are wondering about the rate at which VHM 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 VHM

According to the 2 industry analysts covering VHM, the consensus is that breakeven is near. They expect the company to post a final loss in 2024, before turning a profit of AU$5.3m in 2025. The company is therefore projected to breakeven just over a year from now. 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 114% year-on-year, on average, which is extremely buoyant. 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 VHM 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.

Before we wrap up, there’s one aspect worth mentioning. VHM 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. The company currently operates purely off its shareholder funding and has no debt obligation, reducing concerns around repayments and making it a less risky investment.

Next Steps:

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

1. Valuation: What is VHM 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 VHM 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 VHM’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.