Chaarat Gold Holdings Limited (LON:CGH) Is About To Turn The Corner

Chaarat Gold Holdings Limited (LON:CGH) is possibly approaching a major achievement in its business, so we would like to shine some light on the company. Chaarat Gold Holdings Limited operates as a gold mining company. The company’s loss has recently broadened since it announced a US$29m loss in the full financial year, compared to the latest trailing-twelve-month loss of US$31m, moving it further away from breakeven. As path to profitability is the topic on Chaarat Gold Holdings' 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 Chaarat Gold Holdings

According to the 4 industry analysts covering Chaarat Gold Holdings, the consensus is that breakeven is near. They expect the company to post a final loss in 2020, before turning a profit of US$4.3m in 2021. The company is therefore projected to breakeven around 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 65% 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 Chaarat Gold Holdings given that this is a high-level summary, but, take into account that generally 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 would like to bring into light with Chaarat Gold Holdings is its debt-to-equity ratio of over 2x. Typically, debt shouldn’t exceed 40% of your equity, which in this case, the company has significantly overshot. A higher level of debt requires more stringent capital management which increases the risk around investing in the loss-making company.

Next Steps:

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

1. Valuation: What is Chaarat Gold Holdings 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 Chaarat Gold Holdings 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 Chaarat Gold Holdings’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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