Yahoo Finance Sovereign Metals Limited (ASX:SVM) Is Expected To Breakeven In The Near Future
Sovereign Metals Limited (ASX:SVM) is possibly approaching a major achievement in its business, so we would like to shine some light on the company. Sovereign Metals Limited, together with its subsidiaries, engages in the identification, exploration, development, and appraisal of mineral resource projects in Malawi. The company’s loss has recently broadened since it announced a AU$14m loss in the full financial year, compared to the latest trailing-twelve-month loss of AU$14m, moving it further away from breakeven. Many investors are wondering about the rate at which Sovereign Metals 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.
View our latest analysis for Sovereign Metals
Sovereign Metals is bordering on breakeven, according to the 2 Australian Metals and Mining analysts. They anticipate the company to incur a final loss in 2025, before generating positive profits of AU$177m in 2026. So, the company is predicted to breakeven approximately 3 years from now. 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 62% is expected, which is extremely buoyant. If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.
Underlying developments driving Sovereign Metals' growth isn’t the focus of this broad overview, but, bear 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.
Before we wrap up, there’s one aspect worth mentioning. Sovereign Metals currently has no debt on its balance sheet, which is rare for a loss-making metals and mining company, which typically has high 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:
This article is not intended to be a comprehensive analysis on Sovereign Metals, so if you are interested in understanding the company at a deeper level, take a look at Sovereign Metals' company page on Simply Wall St. We've also put together a list of pertinent aspects you should further examine:
Valuation: What is Sovereign Metals 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 Sovereign Metals 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 Sovereign Metals’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.
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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.