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We feel now is a pretty good time to analyse Adriatic Metals PLC's (ASX:ADT) business as it appears the company may be on the cusp of a considerable accomplishment. Adriatic Metals PLC, through its subsidiaries, engages in the mineral exploration and development business in Bosnia and Herzegovina. On 31 December 2020, the AU$707m market-cap company posted a loss of UK£11m for its most recent financial year. Many investors are wondering about the rate at which Adriatic Metals will turn a profit, with the big question being “when will the company breakeven?” Below we will provide a high-level summary of the industry analysts’ expectations for the company.
According to the 5 industry analysts covering Adriatic Metals, the consensus is that breakeven is near. They anticipate the company to incur a final loss in 2022, before generating positive profits of UK£106m in 2023. Therefore, the company is expected to breakeven roughly 2 years from now. How fast will the company have to grow each year in order to reach the breakeven point by 2023? Working backwards from analyst estimates, it turns out that they expect the company to grow 97% year-on-year, on average, which is rather optimistic! If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.
We're not going to go through company-specific developments for Adriatic Metals given that this is a high-level summary, though, bear 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. The company has managed its capital prudently, with debt making up 24% of equity. This means that it has predominantly funded its operations from equity capital, and its low debt obligation reduces the risk around investing in the loss-making company.
There are too many aspects of Adriatic Metals to cover in one brief article, but the key fundamentals for the company can all be found in one place – Adriatic Metals' company page on Simply Wall St. We've also compiled a list of pertinent aspects you should further research:
Valuation: What is Adriatic 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 Adriatic 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 Adriatic 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.
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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.