Capricorn Metals Ltd (ASX:CMM) is possibly approaching a major achievement in its business, so we would like to shine some light on the company. Capricorn Metals Ltd engages in the mineral exploration and project evaluation business in Australia and Madagascar. The AU$698m market-cap company announced a latest loss of AU$13m on 30 June 2020 for its most recent financial year result. As path to profitability is the topic on Capricorn Metals' 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.
Consensus from 4 of the Australian Metals and Mining analysts is that Capricorn Metals is on the verge of breakeven. They anticipate the company to incur a final loss in 2020, before generating positive profits of AU$16m in 2021. Therefore, the company is expected to breakeven roughly a year from now or less! We calculated the rate at which the company must grow to meet the consensus forecasts predicting breakeven within 12 months. It turns out an average annual growth rate of 54% is expected, which is rather optimistic! If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.
Underlying developments driving Capricorn Metals' growth isn’t the focus of this broad overview, however, keep in mind that by and large 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. Capricorn Metals currently has no debt on its balance sheet, which is quite unusual for a cash-burning metals and mining company, which typically has high debt relative to its equity. This means that the company has been operating purely on its equity investment and has no debt burden. This aspect reduces the risk around investing in the loss-making company.
There are key fundamentals of Capricorn Metals which are not covered in this article, but we must stress again that this is merely a basic overview. For a more comprehensive look at Capricorn Metals, take a look at Capricorn Metals' company page on Simply Wall St. We've also put together a list of pertinent factors you should look at:
- Valuation: What is Capricorn Metals 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 Capricorn Metals 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 Capricorn Metals’s board and the CEO’s background.
- 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. 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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