Strandline Resources Limited's (ASX:STA): Strandline Resources Limited, together with its subsidiaries, engages in the exploration and evaluation of mineral properties in Australia and Tanzania. On 30 June 2019, the AU$43m market-cap posted a loss of -AU$7.0m for its most recent financial year. Many investors are wondering the rate at which STA will turn a profit, with the big question being “when will the company breakeven?” In this article, I will touch on the expectations for STA’s growth and when analysts expect the company to become profitable.
STA is bordering on breakeven, according to the 2 Metals and Mining analysts. They anticipate the company to incur a final loss in 2021, before generating positive profits of AU$76m in 2022. Therefore, STA is expected to breakeven roughly 3 years from today. How fast will STA 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 83% year-on-year, on average, which is extremely buoyant. If this rate turns out to be too aggressive, STA may become profitable much later than analysts predict.
Given this is a high-level overview, I won’t go into details of STA’s upcoming projects, though, take into account 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 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 aspect worth mentioning. STA currently has no debt on its balance sheet, which is rare for a loss-making metals and mining company, which typically has high debt relative to its equity. STA currently operates purely off its shareholder funding and has no debt obligation, reducing concerns around repayments and making it a less risky investment.
This article is not intended to be a comprehensive analysis on STA, so if you are interested in understanding the company at a deeper level, take a look at STA’s company page on Simply Wall St. I’ve also put together a list of relevant factors you should further examine:
- Historical Track Record: What has STA'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.
- Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Strandline Resources’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.
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