Rio2 Limited's (CVE:RIO) Profit Outlook

Rio2 Limited (CVE:RIO) is possibly approaching a major achievement in its business, so we would like to shine some light on the company. Rio2 Limited engages in the exploration, development, and mining of mineral properties in Canada, Peru, Bahamas, and Chile. The company’s loss has recently broadened since it announced a US$12m loss in the full financial year, compared to the latest trailing-twelve-month loss of US$14m, moving it further away from breakeven. The most pressing concern for investors is Rio2's path to profitability – when will it 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 Rio2

Expectations from some of the Canadian Metals and Mining analysts is that Rio2 is on the verge of breakeven. They anticipate the company to incur a final loss in 2025, before generating positive profits of US$36m in 2026. So, the company is predicted to breakeven just over a year from today. How fast will the company have to grow each year in order to reach the breakeven point by 2026? Working backwards from analyst estimates, it turns out that they expect the company to grow 89% 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 Rio2 given that this is a high-level summary, though, keep in mind 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. This means, large upcoming growth rates are not abnormal as the company is beginning to reap the benefits of earlier investments.

One thing we’d like to point out is that Rio2 has no debt on its balance sheet, which is rare for a loss-making metals and mining company, which usually has a high level of 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:

There are key fundamentals of Rio2 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 Rio2, take a look at Rio2'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 Rio2 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 Rio2 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 Rio2’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.