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Market Sentiment Around Loss-Making Cardinal Resources Limited (ASX:CDV)

Simply Wall St

Cardinal Resources Limited's (ASX:CDV): Cardinal Resources Limited, together with its subsidiaries, engages in the exploration and development of mineral properties in Ghana. The AU$193m market-cap company announced a latest loss of -AU$27.1m on 30 June 2019 for its most recent financial year result. The most pressing concern for investors is CDV’s path to profitability – when will it breakeven? Below I will provide a high-level summary of the industry analysts’ expectations for CDV.

See our latest analysis for Cardinal Resources

Consensus from the 2 Metals and Mining analysts is CDV is on the verge of breakeven. They anticipate the company to incur a final loss in 2021, before generating positive profits of AU$181m in 2022. Therefore, CDV is expected to breakeven roughly 3 years from now. How fast will CDV have to grow each year in order to reach the breakeven point by 2022? Working backwards from analyst estimates, it turns out that they expect the company to grow 88% year-on-year, on average, which is rather optimistic! Should the business grow at a slower rate, it will become profitable at a later date than expected.

ASX:CDV Past and Future Earnings, October 14th 2019

Underlying developments driving CDV’s growth isn’t the focus of this broad overview, however, take into account that typically metals and mining companies, depending on the stage of operation and metals mined, have irregular periods of cash flow. This means that a high growth rate is not unusual, especially if the company is currently in an investment period.

Before I wrap up, there’s one issue worth mentioning. CDV currently has negative equity on its balance sheet. Accounting methods used to deal with losses accumulated over time can cause this to occur. This is because liabilities are carried forward into the future until it cancels. These losses tend to occur only on paper, however, in other cases it can be forewarning.

Next Steps:

This article is not intended to be a comprehensive analysis on CDV, so if you are interested in understanding the company at a deeper level, take a look at CDV’s company page on Simply Wall St. I’ve also compiled a list of essential factors you should further research:

  1. Historical Track Record: What has CDV's 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.
  2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Cardinal 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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.