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We Might See A Profit From New Gold Inc. (TSE:NGD) Soon

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·3 min read
In this article:
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We feel now is a pretty good time to analyse New Gold Inc.'s (TSE:NGD) business as it appears the company may be on the cusp of a considerable accomplishment. New Gold Inc., an intermediate gold mining company, engages in the development and operation of mineral properties. The CA$1.2b market-cap company’s loss lessened since it announced a US$79m loss in the full financial year, compared to the latest trailing-twelve-month loss of US$4.4m, as it approaches breakeven. The most pressing concern for investors is New Gold's 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 New Gold

New Gold is bordering on breakeven, according to the 9 Canadian Metals and Mining analysts. They expect the company to post a final loss in 2020, before turning a profit of US$44m in 2021. So, the company is predicted to breakeven approximately a year from now or less! How fast will the company have to grow to reach the consensus forecasts that anticipate breakeven by 2021? Working backwards from analyst estimates, it turns out that they expect the company to grow 38% 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.

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

Underlying developments driving New Gold's growth isn’t the focus of this broad overview, however, 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 that a high growth rate is not unusual, especially if the company is currently in an investment period.

Before we wrap up, there’s one issue worth mentioning. New Gold currently has a relatively high level of debt. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, which in New Gold's case is 60%. A higher level of debt requires more stringent capital management which increases the risk in investing in the loss-making company.

Next Steps:

There are too many aspects of New Gold to cover in one brief article, but the key fundamentals for the company can all be found in one place – New Gold's company page on Simply Wall St. We've also put together a list of relevant aspects you should further examine:

  1. Valuation: What is New Gold 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 New Gold 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 New Gold’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.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.