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Metro Mining Limited (ASX:MMI) Could Be Less Than A Year Away From Profitability

We feel now is a pretty good time to analyse Metro Mining Limited's (ASX:MMI) business as it appears the company may be on the cusp of a considerable accomplishment. Metro Mining Limited, together with its subsidiaries, operates as an exploration and mining company in China. On 31 December 2023, the AU$291m market-cap company posted a loss of AU$13m for its most recent financial year. The most pressing concern for investors is Metro Mining's path to profitability – when will it breakeven? Below we will provide a high-level summary of the industry analysts’ expectations for the company.

See our latest analysis for Metro Mining

According to some industry analysts covering Metro Mining, breakeven is near. They expect the company to post a final loss in 2023, before turning a profit of AU$55m in 2024. Therefore, the company is expected to breakeven roughly 12 months from now or less. How fast will the company have to grow to reach the consensus forecasts that anticipate breakeven by 2024? Working backwards from analyst estimates, it turns out that they expect the company to grow 29% 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.

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

Underlying developments driving Metro Mining's growth isn’t the focus of this broad overview, but, keep in mind that generally 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.

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Before we wrap up, there’s one issue worth mentioning. Metro Mining currently has a debt-to-equity ratio of over 2x. Typically, debt shouldn’t exceed 40% of your equity, which in this case, the company has significantly overshot. Note that a higher debt obligation increases the risk in investing in the loss-making company.

Next Steps:

There are key fundamentals of Metro Mining 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 Metro Mining, take a look at Metro Mining's company page on Simply Wall St. We've also put together a list of pertinent factors you should look at:

  1. Valuation: What is Metro Mining 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 Metro Mining 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 Metro Mining’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.