Desert Mountain Energy Corp.'s (CVE:DME) Shift From Loss To Profit

We feel now is a pretty good time to analyse Desert Mountain Energy Corp.'s (CVE:DME) business as it appears the company may be on the cusp of a considerable accomplishment. Desert Mountain Energy Corp. engages in the exploration and development of oil and gas, helium, hydrogen, condensate, and mineral properties in the Southwestern United States. With the latest financial year loss of CA$12m and a trailing-twelve-month loss of CA$9.6m, the CA$25m market-cap company alleviated its loss by moving closer towards its target of breakeven. Many investors are wondering about the rate at which Desert Mountain Energy will turn a profit, with the big question being “when will the company breakeven?” We've put together a brief outline of industry analyst expectations for the company, its year of breakeven and its implied growth rate.

See our latest analysis for Desert Mountain Energy

Expectations from some of the Canadian Metals and Mining analysts is that Desert Mountain Energy is on the verge of breakeven. They anticipate the company to incur a final loss in 2024, before generating positive profits of CA$3.9m in 2025. Therefore, the company is expected 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 158% year-on-year, on average, which is rather optimistic! 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 Desert Mountain Energy given that this is a high-level summary, however, take into account that generally metals and mining companies, depending on the stage of operation and metals mined, have irregular periods of cash flow. So, a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.

Before we wrap up, there’s one aspect worth mentioning. Desert Mountain Energy 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. 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.

Next Steps:

There are key fundamentals of Desert Mountain Energy which are not covered in this article, but we must stress again that this is merely a basic overview. For a more comprehensive look at Desert Mountain Energy, take a look at Desert Mountain Energy's company page on Simply Wall St. We've also put together a list of important aspects you should further research:

1. Historical Track Record: What has Desert Mountain Energy's performance been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Desert Mountain Energy'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.

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

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.

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