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Lake Resources NL (ASX:LKE): When Will It Breakeven?

Lake Resources NL (ASX:LKE) is possibly approaching a major achievement in its business, so we would like to shine some light on the company. Lake Resources NL explores for and develops lithium brine projects in Argentina. With the latest financial year loss of AU$2.9m and a trailing-twelve-month loss of AU$6.1m, the AU$1.0b market-cap company amplified its loss by moving further away from its breakeven target. Many investors are wondering about the rate at which Lake Resources 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.

View our latest analysis for Lake Resources

According to the 2 industry analysts covering Lake Resources, the consensus is that breakeven is near. They anticipate the company to incur a final loss in 2023, before generating positive profits of AU$1.6m in 2024. So, the company is predicted to breakeven approximately 2 years from now. How fast will the company have to grow each year in order to reach the breakeven point by 2024? Working backwards from analyst estimates, it turns out that they expect the company to grow 99% year-on-year, on average, which is extremely buoyant. Should the business grow at a slower rate, it will become profitable at a later date than expected.

earnings-per-share-growth
earnings-per-share-growth

Given this is a high-level overview, we won’t go into details of Lake Resources' upcoming projects, but, take into account 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, large upcoming growth rates are not abnormal as the company is beginning to reap the benefits of earlier investments.

One thing we’d like to point out is that Lake Resources has no debt on its balance sheet, which is quite unusual for a cash-burning metals and mining company, which usually has a high level of 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.

Next Steps:

There are key fundamentals of Lake Resources 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 Lake Resources, take a look at Lake Resources' company page on Simply Wall St. We've also compiled a list of essential factors you should look at:

  1. Valuation: What is Lake 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 Lake Resources is currently mispriced by the market.

  2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Lake Resources’s board and the CEO’s background.

  3. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

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