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Andromeda Metals Limited's (ASX:ADN): Andromeda Metals Limited, together with its subsidiaries, operates as a mineral exploration company in Australia. With the latest financial year loss of AU$1.1m and a trailing-twelve month of AU$2.6m, the AU$72m market-cap amplifies its loss by moving further away from its breakeven target. The most pressing concern for investors is ADN’s path to profitability – when will it breakeven? I’ve put together a brief outline of industry analyst expectations for ADN, its year of breakeven and its implied growth rate.
According to the industry analysts covering ADN, breakeven is near. They expect the company to post a final loss in 2021, before turning a profit of AU$31m in 2022. Therefore, ADN is expected to breakeven roughly 2 years from now. In order to meet this breakeven date, I calculated the rate at which ADN must grow year-on-year. It turns out an average annual growth rate of 52% is expected, which signals high confidence from analysts. Should the business grow at a slower rate, it will become profitable at a later date than expected.
Underlying developments driving ADN’s growth isn’t the focus of this broad overview, but, 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. This means that a high growth rate is not unusual, especially if the company is currently in an investment period.
One thing I’d like to point out is that ADN has no debt on its balance sheet, which is quite unusual for a cash-burning metals and mining company, which usually has a high level of debt relative to its equity. This means that ADN has been operating purely on its equity investment and has no debt burden. This aspect reduces the risk around investing in the loss-making company.
This article is not intended to be a comprehensive analysis on ADN, so if you are interested in understanding the company at a deeper level, take a look at ADN’s company page on Simply Wall St. I’ve also put together a list of essential factors you should further examine:
- Historical Track Record: What has ADN's performance been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
- Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Andromeda Metals’s board and the CEO’s back ground.
- 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.
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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