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Pilbara Minerals Limited (ASX:PLS) is possibly approaching a major achievement in its business, so we would like to shine some light on the company. Pilbara Minerals Limited engages in the exploration, development, and operation of mineral resources in Australia. The AU$835m market-cap company announced a latest loss of AU$99m on 30 June 2020 for its most recent financial year result. Many investors are wondering about the rate at which Pilbara Minerals 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.
Pilbara Minerals is bordering on breakeven, according to the 5 Australian Metals and Mining analysts. They expect the company to post a final loss in 2021, before turning a profit of AU$12m in 2022. Therefore, the company is expected to breakeven roughly 2 years from today. How fast will the company have to grow each year in order to reach the breakeven point by 2022? Working backwards from analyst estimates, it turns out that they expect the company to grow 106% year-on-year, on average, which is extremely buoyant. 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 Pilbara Minerals' upcoming projects, however, 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.
Before we wrap up, there’s one aspect worth mentioning. The company has managed its capital prudently, with debt making up 35% 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 Pilbara Minerals to cover in one brief article, but the key fundamentals for the company can all be found in one place – Pilbara Minerals' company page on Simply Wall St. We've also compiled a list of pertinent factors you should look at:
Valuation: What is Pilbara Minerals 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 Pilbara Minerals 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 Pilbara Minerals’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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