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Loss-Making Rainbow Rare Earths Limited (LON:RBW) Expected To Breakeven In The Medium-Term

Rainbow Rare Earths Limited (LON:RBW) is possibly approaching a major achievement in its business, so we would like to shine some light on the company. Rainbow Rare Earths Limited engages in the mining and exploration of rare earth minerals. The company’s loss has recently broadened since it announced a US$2.7m loss in the full financial year, compared to the latest trailing-twelve-month loss of US$3.9m, moving it further away from breakeven. As path to profitability is the topic on Rainbow Rare Earths' investors mind, we've decided to gauge market sentiment. We've put together a brief outline of industry analyst expectations for the company, its year of breakeven and its implied growth rate.

See our latest analysis for Rainbow Rare Earths

Expectations from some of the British Metals and Mining analysts is that Rainbow Rare Earths is on the verge of breakeven. They expect the company to post a final loss in 2023, before turning a profit of US$1.0m in 2024. So, the company is predicted to breakeven approximately 2 years from now. What rate will the company have to grow year-on-year in order to breakeven on this date? Using a line of best fit, we calculated an average annual growth rate of 75%, which is rather optimistic! Should the business grow at a slower rate, it will become profitable at a later date than expected.

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

We're not going to go through company-specific developments for Rainbow Rare Earths given that this is a high-level summary, 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 we wrap up, there’s one aspect worth mentioning. The company has managed its capital prudently, with debt making up 5.5% 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.

Next Steps:

This article is not intended to be a comprehensive analysis on Rainbow Rare Earths, so if you are interested in understanding the company at a deeper level, take a look at Rainbow Rare Earths' company page on Simply Wall St. We've also put together a list of pertinent aspects you should look at:

  1. Valuation: What is Rainbow Rare Earths 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 Rainbow Rare Earths 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 Rainbow Rare Earths’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.

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.

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