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With the business potentially at an important milestone, we thought we'd take a closer look at Strandline Resources Limited's (ASX:STA) future prospects. Strandline Resources Limited, together with its subsidiaries, engages in the exploration and evaluation of mineral sands, and other base metal resources in Australia and Tanzania. With the latest financial year loss of AU$8.1m and a trailing-twelve-month loss of AU$10.0m, the AU$143m market-cap company amplified its loss by moving further away from its breakeven target. Many investors are wondering about the rate at which Strandline Resources will turn a profit, with the big question being “when will the company breakeven?” We've put together a brief outline of industry analyst expectations for the company, its year of breakeven and its implied growth rate.
Strandline Resources is bordering on breakeven, according to the 2 Australian Metals and Mining analysts. They expect the company to post a final loss in 2021, before turning a profit of AU$22m in 2022. Therefore, the company is expected to breakeven just over a year from now. What rate will the company have to grow year-on-year in order to breakeven on this date? Using a line of best fit, we calculated an average annual growth rate of 53%, which signals high confidence from analysts. If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.
Given this is a high-level overview, we won’t go into details of Strandline Resources' upcoming projects, but, keep in mind that typically 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.
One thing we’d like to point out is that Strandline Resources 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. 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.
This article is not intended to be a comprehensive analysis on Strandline Resources, so if you are interested in understanding the company at a deeper level, take a look at Strandline Resources' company page on Simply Wall St. We've also compiled a list of key aspects you should look at:
Valuation: What is Strandline Resources 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 Strandline Resources 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 Strandline Resources’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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