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New Century Resources Limited's (ASX:NCZ) Has Found A Path To Profitability

We feel now is a pretty good time to analyse New Century Resources Limited's (ASX:NCZ) business as it appears the company may be on the cusp of a considerable accomplishment. New Century Resources Limited operates as a base metal development and production company in Australia and the United States. The AU$142m market-cap company announced a latest loss of AU$8.1m on 30 June 2020 for its most recent financial year result. Many investors are wondering about the rate at which New Century Resources will turn a profit, with the big question being “when will the company breakeven?” Below we will provide a high-level summary of the industry analysts’ expectations for the company.

See our latest analysis for New Century Resources

Consensus from 2 of the Australian Metals and Mining analysts is that New Century Resources is on the verge of breakeven. They anticipate the company to incur a final loss in 2020, before generating positive profits of AU$33m in 2021. Therefore, the company is expected to breakeven roughly a year from now or less! How fast will the company have to grow to reach the consensus forecasts that anticipate breakeven by 2021? Working backwards from analyst estimates, it turns out that they expect the company to grow 107% year-on-year, on average, which is rather optimistic! If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.

earnings-per-share-growth
earnings-per-share-growth

We're not going to go through company-specific developments for New Century Resources given that this is a high-level summary, however, keep 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. 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. New Century Resources currently has a debt-to-equity ratio of 173%. Typically, 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.

Next Steps:

There are too many aspects of New Century Resources to cover in one brief article, but the key fundamentals for the company can all be found in one place – New Century Resources' company page on Simply Wall St. We've also compiled a list of relevant factors you should further examine:

  1. Valuation: What is New Century Resources 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 New Century Resources is currently mispriced by the market.

  2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on New Century Resources’s board and the CEO’s background.

  3. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.

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