Galane Gold Ltd.'s (CVE:GG) About To Shift From Loss To Profit

Galane Gold Ltd. (CVE:GG) is possibly approaching a major achievement in its business, so we would like to shine some light on the company. Galane Gold Ltd., through its subsidiary, Galane Gold Mines Ltd., engages in the exploration for, development, and operation of gold mining properties. The CA$66m market-cap company’s loss lessened since it announced a US$3.8m loss in the full financial year, compared to the latest trailing-twelve-month loss of US$1.8m, as it approaches breakeven. Many investors are wondering about the rate at which Galane Gold 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 Galane Gold

Galane Gold is bordering on breakeven, according to some Canadian Metals and Mining analysts. They expect the company to post a final loss in 2020, before turning a profit of US$12m in 2021. So, the company is predicted to breakeven approximately a year from now or less! How fast will the company have to grow to reach the consensus forecasts that anticipate breakeven by 2021? Working backwards from analyst estimates, it turns out that they expect the company to grow 172% year-on-year, on average, which is rather optimistic! 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 Galane Gold given that this is a high-level summary, though, keep in mind that typically 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.

One thing we would like to bring into light with Galane Gold is its relatively high level of debt. Typically, debt shouldn’t exceed 40% of your equity, which in Galane Gold's case is 80%. A higher level of debt requires more stringent capital management which increases the risk in investing in the loss-making company.

Next Steps:

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

1. Valuation: What is Galane 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 Galane 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 Galane 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.

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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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