In This Article:
Pilbara Minerals Limited's (ASX:PLS): Pilbara Minerals Limited engages in the exploration, development, and operation of mineral resources in Australia. On 30 June 2019, the AU$567m market-cap posted a loss of -AU$28.9m for its most recent financial year. Many investors are wondering the rate at which PLS will turn a profit, with the big question being “when will the company breakeven?” In this article, I will touch on the expectations for PLS’s growth and when analysts expect the company to become profitable.
View our latest analysis for Pilbara Minerals
Consensus from the 6 Metals and Mining analysts is PLS is on the verge of breakeven. They anticipate the company to incur a final loss in 2020, before generating positive profits of AU$60m in 2021. Therefore, PLS is expected to breakeven roughly 2 years from now. How fast will PLS have to grow each year in order to reach the breakeven point by 2021? Working backwards from analyst estimates, it turns out that they expect the company to grow 87% year-on-year, on average, which signals high confidence from analysts. If this rate turns out to be too aggressive, PLS may become profitable much later than analysts predict.
I’m not going to go through company-specific developments for PLS given that this is a high-level summary, but, take into account that generally 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.
One thing I’d like to point out is that PLS has managed its capital prudently, with debt making up 36% of equity. This means that PLS has predominantly funded its operations from equity capital,and its low debt obligation reduces the risk around investing in the loss-making company.
Next Steps:
There are too many aspects of PLS to cover in one brief article, but the key fundamentals for the company can all be found in one place – PLS’s company page on Simply Wall St. I’ve also compiled a list of pertinent factors you should further research:
-
Valuation: What is PLS 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 PLS 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 back ground.
-
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.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.