Continental Gold Inc’s (TSE:CNL): Continental Gold Inc., together with its subsidiaries, engages in the acquisition, exploration, evaluation, and development of gold resource properties in Colombia. With the latest financial year loss of -US$7.8m and a trailing-twelve month of -US$18.3m, the CA$396m market-cap amplifies its loss by moving further away from its breakeven target. Many investors are wondering the rate at which CNL will turn a profit, with the big question being “when will the company breakeven?” I’ve put together a brief outline of industry analyst expectations for CNL, its year of breakeven and its implied growth rate.
CNL is bordering on breakeven, according to Metals and Mining analysts. They expect the company to post a final loss in 2019, before turning a profit of US$1.8m in 2020. So, CNL is predicted to breakeven approximately 2 years from today. What rate will CNL have to grow year-on-year in order to breakeven on this date? Using a line of best fit, I calculated an average annual growth rate of 107%, which is rather optimistic! 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 CNL’s upcoming projects, though, bear in mind that generally 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 I wrap up, there’s one issue worth mentioning. CNL currently has a relatively high level of debt. Typically, debt shouldn’t exceed 40% of your equity, which in CNL’s case is 59%. Note that a higher debt obligation increases the risk in investing in the loss-making company.
There are too many aspects of CNL to cover in one brief article, but the key fundamentals for the company can all be found in one place – CNL’s company page on Simply Wall St. I’ve also put together a list of key aspects you should further examine:
- Valuation: What is CNL 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 CNL 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 Continental Gold’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.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.