We feel now is a pretty good time to analyse Adriatic Metals PLC's (ASX:ADT) business as it appears the company may be on the cusp of a considerable accomplishment. Adriatic Metals PLC, through its subsidiaries, engages in the exploration and development of precious and base metals. The company’s loss has recently broadened since it announced a US$47m loss in the full financial year, compared to the latest trailing-twelve-month loss of US$48m, moving it further away from breakeven. The most pressing concern for investors is Adriatic Metals' 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.
Adriatic Metals is bordering on breakeven, according to the 5 Australian Metals and Mining analysts. They expect the company to post a final loss in 2023, before turning a profit of US$151m in 2024. The company is therefore projected to breakeven just over a year from today. 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 rather optimistic! Should the business grow at a slower rate, it will become profitable at a later date than expected.
Underlying developments driving Adriatic Metals' growth isn’t the focus of this broad overview, but, bear 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. So, a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.
Before we wrap up, there’s one issue worth mentioning. Adriatic Metals currently has a debt-to-equity ratio of 140%. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, and the company has considerably exceeded this. Note that a higher debt obligation increases the risk in investing in the loss-making company.
There are too many aspects of Adriatic Metals to cover in one brief article, but the key fundamentals for the company can all be found in one place – Adriatic Metals' company page on Simply Wall St. We've also put together a list of relevant aspects you should further research:
Valuation: What is Adriatic Metals 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 Adriatic Metals is currently mispriced by the market.
Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Adriatic Metals’s board and the CEO’s background.
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.