Superior Gold Inc.'s (CVE:SGI) Path To Profitability

With the business potentially at an important milestone, we thought we'd take a closer look at Superior Gold Inc.'s (CVE:SGI) future prospects. Superior Gold Inc. acquires, explores, develops, and operates gold resource properties. With the latest financial year loss of US$12m and a trailing-twelve-month loss of US$9.6m, the CA$71m market-cap company alleviated its loss by moving closer towards its target of breakeven. As path to profitability is the topic on Superior Gold's investors mind, we've decided to gauge market sentiment. Below we will provide a high-level summary of the industry analysts’ expectations for the company.

Check out our latest analysis for Superior Gold

Superior Gold is bordering on breakeven, according to the 4 Canadian Metals and Mining analysts. They anticipate the company to incur a final loss in 2020, before generating positive profits of US$19m in 2021. The company is therefore projected 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 2021? Working backwards from analyst estimates, it turns out that they expect the company to grow 123% 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 Superior Gold given that this is a high-level summary, but, 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 that a high growth rate is not unusual, especially if the company is currently in an investment period.

One thing we’d like to point out is that The company has managed its capital judiciously, with debt making up 15% of equity. This means that it has predominantly funded its operations from equity capital, and its low debt obligation reduces the risk around investing in the loss-making company.

Next Steps:

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

1. Valuation: What is Superior 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 Superior 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 Superior 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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