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When Will Kidman Resources Limited (ASX:KDR) Become Profitable?

David Rizzo

Kidman Resources Limited’s (ASX:KDR): Kidman Resources Limited explores for and develops base metals and rare earth deposits in Australia. On 30 June 2018, the AU$393m market-cap posted a loss of -AU$9.7m for its most recent financial year. The most pressing concern for investors is KDR’s path to profitability – when will it breakeven? I’ve put together a brief outline of industry analyst expectations for KDR, its year of breakeven and its implied growth rate.

Check out our latest analysis for Kidman Resources

Consensus from the 3 Metals and Mining analysts is KDR is on the verge of breakeven. They anticipate the company to incur a final loss in 2020, before generating positive profits of AU$59m in 2021. Therefore, KDR is expected to breakeven roughly 3 years from now. How fast will KDR have to grow each year in order to reach the breakeven point by 2021? Working backwards from analyst estimates, it turns out that they expect the company to grow 93% year-on-year, on average, which is extremely buoyant. If this rate turns out to be too aggressive, KDR may become profitable much later than analysts predict.

ASX:KDR Past Future Earnings December 27th 18

I’m not going to go through company-specific developments for KDR given that this is a high-level summary, but, take into account 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. This means, large upcoming growth rates are not abnormal as the company is beginning to reap the benefits of earlier investments.

Before I wrap up, there’s one aspect worth mentioning. KDR has managed its capital judiciously, with debt making up 40% of equity. This means that KDR has predominantly funded its operations from equity capital,and its low debt obligation reduces the risk around investing in the loss-making company.

Next Steps:

There are too many aspects of KDR to cover in one brief article, but the key fundamentals for the company can all be found in one place – KDR’s company page on Simply Wall St. I’ve also compiled a list of important factors you should look at:

  1. Valuation: What is KDR 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 KDR 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 Kidman Resources’s board and the CEO’s back ground.
  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.

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 editorial-team@simplywallst.com.