Firestone Diamonds plc (LON:FDI): When Will It Breakeven?
Firestone Diamonds plc’s (AIM:FDI): Firestone Diamonds plc mines, explores for, and develops diamond properties in Lesotho and Botswana. On 30 June 2017, the UK£36.62M market-cap posted a loss of -US$116.41M for its most recent financial year. The most pressing concern for investors is FDI’s path to profitability – when will it breakeven? I’ve put together a brief outline of industry analyst expectations for FDI, its year of breakeven and its implied growth rate.
Check out our latest analysis for Firestone Diamonds
According to the industry analysts covering FDI, breakeven is near. They expect the company to post a final loss in 2019, before turning a profit of US$2.78M in 2020. Therefore, FDI is expected to breakeven roughly 2 years from now. In order to meet this breakeven date, I calculated the rate at which FDI must grow year-on-year. It turns out an average annual growth rate of 118.62% is expected, which is rather optimistic! If this rate turns out to be too aggressive, FDI may become profitable much later than analysts predict.
Given this is a high-level overview, I won’t go into detail the detail of FDI’s upcoming projects, though, take into account that generally metals and mining companies, depending on the stage of operation and metals mined, have irregular periods of cash flow. 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. FDI currently has a debt-to-equity ratio of over 2x. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, and FDI has considerably exceeded this. Note that a higher debt obligation increases the risk around investing in the loss-making company.
Next Steps:
There are too many aspects of FDI to cover in one brief article, but the key fundamentals for the company can all be found in one place – FDI’s company page on Simply Wall St. I’ve also compiled a list of important aspects you should further research:
Valuation: What is FDI 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 FDI 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 Firestone Diamonds’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 pass 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.
