When Will Arafura Rare Earths Limited (ASX:ARU) Breakeven?
With the business potentially at an important milestone, we thought we'd take a closer look at Arafura Rare Earths Limited's (ASX:ARU) future prospects. Arafura Rare Earths Limited explores for and develops mineral properties in Australia. The AU$528m market-cap company announced a latest loss of AU$96m on 30 June 2023 for its most recent financial year result. As path to profitability is the topic on Arafura Rare Earths' investors mind, we've decided to gauge market sentiment. In this article, we will touch on the expectations for the company's growth and when analysts expect it to become profitable.
View our latest analysis for Arafura Rare Earths
According to the 3 industry analysts covering Arafura Rare Earths, the consensus is that breakeven is near. They expect the company to post a final loss in 2025, before turning a profit of AU$62m in 2026. So, the company is predicted to breakeven approximately 3 years from today. What rate will the company have to grow year-on-year in order to breakeven on this date? Using a line of best fit, we calculated an average annual growth rate of 45%, which is extremely buoyant. Should the business grow at a slower rate, it will become profitable at a later date than expected.
We're not going to go through company-specific developments for Arafura Rare Earths given that this is a high-level summary, but, take into account that typically 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 we’d like to point out is that Arafura Rare Earths has no debt on its balance sheet, which is rare for a loss-making metals and mining company, which typically has high debt relative to its equity. The company currently operates purely off its shareholder funding and has no debt obligation, reducing concerns around repayments and making it a less risky investment.
Next Steps:
There are too many aspects of Arafura Rare Earths to cover in one brief article, but the key fundamentals for the company can all be found in one place – Arafura Rare Earths' company page on Simply Wall St. We've also put together a list of pertinent aspects you should further examine:
Historical Track Record: What has Arafura Rare Earths' 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 Arafura Rare Earths' 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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
