Andromeda Metals Limited's (ASX:ADN): Andromeda Metals Limited, together with its subsidiaries, operates as a mineral exploration company in Australia. On 30 June 2019, the AU$65m market-cap posted a loss of -AU$1.1m for its most recent financial year. As path to profitability is the topic on ADN’s investors mind, I’ve decided to gauge market sentiment. In this article, I will touch on the expectations for ADN’s growth and when analysts expect the company to become profitable.
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$39m in 2022. ADN is therefore projected to breakeven around 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 58% is expected, which is extremely buoyant. If this rate turns out to be too aggressive, ADN may become profitable much later than analysts predict.
I’m not going to go through company-specific developments for ADN given that this is a high-level summary, though, keep in mind that by and large metals and mining companies, depending on the stage of operation and metals mined, have irregular periods of cash flow. 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.
There are key fundamentals of ADN which are not covered in this article, but I must stress again that this is merely a basic overview. For a more comprehensive look at ADN, take a look at ADN’s company page on Simply Wall St. I’ve also compiled a list of important factors you should further research:
- Valuation: What is ADN 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 ADN 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 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.
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