Loss-Making Metals X Limited (ASX:MLX) Expected To Breakeven

Metals X Limited's (ASX:MLX): Metals X Limited engages in the operation of tin and copper mines in Australia. With the latest financial year loss of -AU$117.0m and a trailing-twelve month of -AU$142.4m, the AU$79m market-cap amplifies its loss by moving further away from its breakeven target. The most pressing concern for investors is MLX’s path to profitability – when will it breakeven? I’ve put together a brief outline of industry analyst expectations for MLX, its year of breakeven and its implied growth rate.

See our latest analysis for Metals X

MLX is bordering on breakeven, according to the 3 Metals and Mining analysts. They expect the company to post a final loss in 2021, before turning a profit of AU$13m in 2022. MLX is therefore projected to breakeven around 2 years from now. In order to meet this breakeven date, I calculated the rate at which MLX must grow year-on-year. It turns out an average annual growth rate of 84% is expected, which signals high confidence from analysts. If this rate turns out to be too aggressive, MLX may become profitable much later than analysts predict.

ASX:MLX Past and Future Earnings May 26th 2020

I’m not going to go through company-specific developments for MLX given that this is a high-level summary, though, keep in mind that generally metals and mining companies, depending on the stage of operation and metals mined, have irregular periods of cash flow. This means, large upcoming growth rates are not abnormal as the company is beginning to reap the benefits of earlier investments.

Before I wrap up, there’s one issue worth mentioning. MLX currently has a relatively high level of debt. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, which in MLX’s case is 48%. A higher level of debt requires more stringent capital management which increases the risk around investing in the loss-making company.

Next Steps:

There are too many aspects of MLX to cover in one brief article, but the key fundamentals for the company can all be found in one place – MLX’s company page on Simply Wall St. I’ve also compiled a list of essential factors you should look at:

1. Historical Track Record: What has MLX'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.

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

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.

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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. Thank you for reading.