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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. With the latest financial year loss of AU$99m and a trailing-twelve-month loss of AU$57m, the AU$4.1b market-cap company alleviated its loss by moving closer towards its target of breakeven. 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?” Below we will provide a high-level summary of the industry analysts’ expectations for the company.
Consensus from 5 of the Australian Metals and Mining analysts is that Pilbara Minerals is on the verge of breakeven. They anticipate the company to incur a final loss in 2021, before generating positive profits of AU$130m in 2022. The company is therefore projected to breakeven just over a year from today. In order to meet this breakeven date, we calculated the rate at which the company must grow year-on-year. It turns out an average annual growth rate of 105% is expected, 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.
We're not going to go through company-specific developments for Pilbara Minerals given that this is a high-level summary, however, bear in mind that by and large 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. So, a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.
Before we wrap up, there’s one aspect worth mentioning. The company has managed its capital prudently, with debt making up 25% 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 key fundamentals of Pilbara Minerals 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 Pilbara Minerals, take a look at Pilbara Minerals' company page on Simply Wall St. We've also put together a list of key aspects 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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