Yahoo Finance Loss-Making Lundin Gold Inc. (TSE:LUG) Set To Breakeven
Lundin Gold Inc. (TSE:LUG) is possibly approaching a major achievement in its business, so we would like to shine some light on the company. Lundin Gold Inc. operates as a mining company in Canada. The CA$2.6b market-cap company posted a loss in its most recent financial year of US$118.9m and a latest trailing-twelve-month loss of US$154.1m leading to an even wider gap between loss and breakeven. The most pressing concern for investors is Lundin Gold's path to profitability – when will it breakeven? In this article, we will touch on the expectations for the company's growth and when analysts expect it to become profitable.
See our latest analysis for Lundin Gold
According to the 9 industry analysts covering Lundin Gold, the consensus is that breakeven is near. They anticipate the company to incur a final loss in 2019, before generating positive profits of US$27m in 2020. 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 25%, which is rather optimistic! Should the business grow at a slower rate, it will become profitable at a later date than expected.
We're not going to go through company-specific developments for Lundin Gold given that this is a high-level summary, 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 that a high growth rate is not unusual, especially if the company is currently in an investment period.
Before we wrap up, there’s one issue worth mentioning. Lundin Gold currently has a debt-to-equity ratio of 139%. Generally, the rule of thumb is 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:
This article is not intended to be a comprehensive analysis on Lundin Gold, so if you are interested in understanding the company at a deeper level, take a look at Lundin Gold's company page on Simply Wall St. We've also put together a list of relevant aspects you should look at:
Valuation: What is Lundin Gold 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 Lundin Gold 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 Lundin Gold’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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