Yahoo Finance Strandline Resources Limited (ASX:STA) About To Shift From Loss To Profit
We feel now is a pretty good time to analyse Strandline Resources Limited's (ASX:STA) business as it appears the company may be on the cusp of a considerable accomplishment. Strandline Resources Limited, together with its subsidiaries, engages in the exploration and evaluation of mineral sands, and other base metal resources in Australia and Tanzania. With the latest financial year loss of AU$9.1m and a trailing-twelve-month loss of AU$16m, the AU$464m market-cap company amplified its loss by moving further away from its breakeven target. The most pressing concern for investors is Strandline Resources' 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 Strandline Resources
According to the 2 industry analysts covering Strandline Resources, the consensus is that breakeven is near. They expect the company to post a final loss in 2022, before turning a profit of AU$20m in 2023. Therefore, the company is expected to breakeven roughly a year from now or less! At what rate will the company have to grow in order to realise the consensus estimates forecasting breakeven in under 12 months? Using a line of best fit, we calculated an average annual growth rate of 80%, which is rather optimistic! 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 Strandline Resources given that this is a high-level summary, 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.
One thing we would like to bring into light with Strandline Resources is its debt-to-equity ratio of 111%. Typically, debt shouldn’t exceed 40% of your equity, and the company has considerably exceeded this. 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 key fundamentals of Strandline Resources 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 Strandline Resources, take a look at Strandline Resources' company page on Simply Wall St. We've also put together a list of pertinent factors you should further research:
Valuation: What is Strandline Resources 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 Strandline Resources 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 Strandline Resources’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.
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.
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