Australian Potash Limited (ASX:APC): Is Breakeven Near?
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Australian Potash Limited's (ASX:APC): Australian Potash Limited operates as a minerals exploration company in Australia. The AU$35m market-cap company’s loss lessens since it announced a -AU$5.0m bottom-line in the full financial year, compared to the latest trailing-twelve-month loss of -AU$3.5m, as it approaches breakeven. The most pressing concern for investors is APC’s path to profitability – when will it breakeven? I’ve put together a brief outline of industry analyst expectations for APC, its year of breakeven and its implied growth rate.
See our latest analysis for Australian Potash
APC is bordering on breakeven, according to Metals and Mining analysts. They expect the company to post a final loss in 2020, before turning a profit of AU$4.4m in 2021. Therefore, APC is expected to breakeven roughly 2 years from now. In order to meet this breakeven date, I calculated the rate at which APC must grow year-on-year. It turns out an average annual growth rate of 88% is expected, which is extremely buoyant. Should the business grow at a slower rate, it will become profitable at a later date than expected.
Given this is a high-level overview, I won’t go into details of APC’s upcoming projects, but, keep 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. 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 APC has no debt on its balance sheet, which is quite unusual for a cash-burning metals and mining company, which typically has high debt relative to its equity. This means that APC 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.
Next Steps:
There are too many aspects of APC to cover in one brief article, but the key fundamentals for the company can all be found in one place – APC’s company page on Simply Wall St. I’ve also compiled a list of essential aspects you should further examine:
Historical Track Record: What has APC'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 Australian Potash’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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If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.
