Rainbow Rare Earths Limited's (LON:RBW) Shift From Loss To Profit

We feel now is a pretty good time to analyse Rainbow Rare Earths Limited's (LON:RBW) business as it appears the company may be on the cusp of a considerable accomplishment. Rainbow Rare Earths Limited engages in the mining and exploration of rare earth minerals. The UK£84m market-cap company’s loss lessened since it announced a US$3.9m loss in the full financial year, compared to the latest trailing-twelve-month loss of US$3.3m, as it approaches breakeven. The most pressing concern for investors is Rainbow Rare Earths' 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.

Check out our latest analysis for Rainbow Rare Earths

According to the 3 industry analysts covering Rainbow Rare Earths, the consensus is that breakeven is near. They anticipate the company to incur a final loss in 2025, before generating positive profits of US$44m in 2026. So, the company is predicted to breakeven approximately 3 years from now. In order to meet this breakeven date, we calculated the rate at which the company must grow year-on-year. It turns out an average annual growth rate of 49% is expected, which is extremely buoyant. If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.

Given this is a high-level overview, we won’t go into details of Rainbow Rare Earths' upcoming projects, however, bear in mind that typically 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. So, a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.

One thing we’d like to point out is that The company has managed its capital judiciously, with debt making up 4.9% 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:

There are key fundamentals of Rainbow Rare Earths 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 Rainbow Rare Earths, take a look at Rainbow Rare Earths' company page on Simply Wall St. We've also put together a list of essential aspects you should look at:

1. Valuation: What is Rainbow Rare Earths 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 Rainbow Rare Earths 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 Rainbow Rare Earths’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.