Nemaska Lithium Inc.’s (TSE:NMX): Nemaska Lithium Inc. operates as a developing chemical company in Canada. The company’s loss has recently broadened since it announced a -CA$12.1m loss in the full financial year, compared to the latest trailing-twelve-month loss of -CA$15.8m, moving it further away from breakeven. The most pressing concern for investors is NMX’s path to profitability – when will it breakeven? Below I will provide a high-level summary of the industry analysts’ expectations for NMX.
Consensus from the 4 Metals and Mining analysts is NMX is on the verge of breakeven. They anticipate the company to incur a final loss in 2019, before generating positive profits of CA$98m in 2020. So, NMX is predicted to breakeven approximately 2 years from today. In order to meet this breakeven date, I calculated the rate at which NMX must grow year-on-year. It turns out an average annual growth rate of 65% is expected, which signals high confidence from analysts. Should the business grow at a slower rate, it will become profitable at a later date than expected.
Underlying developments driving NMX’s growth isn’t the focus of this broad overview, but, bear in mind 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.
One thing I would like to bring into light with NMX is its relatively high level of debt. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, which in NMX’s case is 92%. A higher level of debt requires more stringent capital management which increases the risk around investing in the loss-making company.
There are too many aspects of NMX to cover in one brief article, but the key fundamentals for the company can all be found in one place – NMX’s company page on Simply Wall St. I’ve also compiled a list of key aspects you should further research:
- Valuation: What is NMX 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 NMX is currently mispriced by the market.
- Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Nemaska Lithium’s board and the CEO’s back ground.
- 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 firstname.lastname@example.org.