Loss-Making Lithium Americas Corp. (TSE:LAC) Set To Breakeven
We feel now is a pretty good time to analyse Lithium Americas Corp.'s (TSE:LAC) business as it appears the company may be on the cusp of a considerable accomplishment. Lithium Americas Corp. operates as a resource company in the United States and Argentina. On 31 December 2022, the CA$4.4b market-cap company posted a loss of US$94m for its most recent financial year. The most pressing concern for investors is Lithium Americas' path to profitability – when will it breakeven? We've put together a brief outline of industry analyst expectations for the company, its year of breakeven and its implied growth rate.
View our latest analysis for Lithium Americas
Consensus from 8 of the Canadian Metals and Mining analysts is that Lithium Americas is on the verge of breakeven. They anticipate the company to incur a final loss in 2022, before generating positive profits of US$88m in 2023. So, the company is predicted to breakeven approximately 12 months from now or less. At what rate will the company have to grow in order to realise the consensus estimates forecasting breakeven in under 12 months? Using a line of best fit, we calculated an average annual growth rate of 60%, which signals high confidence from analysts. If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.
Given this is a high-level overview, we won’t go into details of Lithium Americas' upcoming projects, though, take into account that by and large metals and mining companies, depending on the stage of operation and metals mined, have irregular periods of cash flow. This means, large upcoming growth rates are not abnormal as the company is beginning to reap the benefits of earlier investments.
One thing we’d like to point out is that The company has managed its capital prudently, with debt making up 26% of equity. This means that it has predominantly funded its operations from equity capital, and its low debt obligation reduces the risk around investing in the loss-making company.
This article is not intended to be a comprehensive analysis on Lithium Americas, so if you are interested in understanding the company at a deeper level, take a look at Lithium Americas' company page on Simply Wall St. We've also put together a list of relevant factors you should further research:
Historical Track Record: What has Lithium Americas' 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 Lithium Americas' board and the CEO’s background.
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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.
Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here