New Gold Inc. (TSE:NGD) On The Verge Of Breaking Even

By
Simply Wall St
Published
May 10, 2021
TSX:NGD

We feel now is a pretty good time to analyse New Gold Inc.'s (TSE:NGD) business as it appears the company may be on the cusp of a considerable accomplishment. New Gold Inc., an intermediate gold mining company, engages in the development and operation of mineral properties. With the latest financial year loss of US$79m and a trailing-twelve-month loss of US$36m, the CA$1.5b market-cap company alleviated its loss by moving closer towards its target of breakeven. Many investors are wondering about the rate at which New Gold 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.

Check out our latest analysis for New Gold

New Gold is bordering on breakeven, according to the 8 Canadian Metals and Mining analysts. They anticipate the company to incur a final loss in 2020, before generating positive profits of US$122m in 2021. So, the company is predicted to breakeven approximately a year from now or less! We calculated the rate at which the company must grow to meet the consensus forecasts predicting breakeven within 12 months. It turns out an average annual growth rate of 11% is expected, which seems realistic. Should the business grow at a slower rate, it will become profitable at a later date than expected.

earnings-per-share-growth
TSX:NGD Earnings Per Share Growth May 10th 2021

Underlying developments driving New Gold's growth isn’t the focus of this broad overview, however, bear in mind that generally metals and mining companies, depending on the stage of operation and metals mined, have irregular periods of cash flow. This means a double-digit growth rate is not unusual, especially if the company is currently in an investment period.

Before we wrap up, there’s one issue worth mentioning. New Gold currently has a relatively high level of debt. Typically, debt shouldn’t exceed 40% of your equity, which in New Gold's case is 57%. 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 New Gold to cover in one brief article, but the key fundamentals for the company can all be found in one place – New Gold's company page on Simply Wall St. We've also put together a list of important factors you should look at:

  1. Valuation: What is New Gold 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 Gold 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 Gold’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.

Promoted
If you’re looking to trade a wide range of investments, open an account with the lowest-cost* platform trusted by professionals, Interactive Brokers. Their clients from over 200 countries and territories trade stocks, options, futures, forex, bonds and funds worldwide from a single integrated account.


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.
*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020


Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

Discounted cash flow calculation for every stock

Simply Wall St does a detailed discounted cash flow calculation every 6 hours for every stock on the market, so if you want to find the intrinsic value of any company just search here. It’s FREE.


Simply Wall St character - Warren

Simply Wall St

Simply Wall St is a financial technology startup focused on providing unbiased, high-quality research coverage on every listed company in the world. Our research team consists of equity analysts with a public, market-beating track record.