McEwen Mining Inc.'s (NYSE:MUX): McEwen Mining Inc. engages in the exploration, development, production, and sale of gold and silver. On 31 December 2019, the US$270m market-cap posted a loss of -US$59.7m for its most recent financial year. Many investors are wondering the rate at which MUX will turn a profit, with the big question being “when will the company breakeven?” I’ve put together a brief outline of industry analyst expectations for MUX, its year of breakeven and its implied growth rate.
Consensus from the 3 Metals and Mining analysts is MUX is on the verge of breakeven. They anticipate the company to incur a final loss in 2020, before generating positive profits of US$13m in 2021. So, MUX is predicted to breakeven approximately a couple of months from now! How fast will MUX 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 161% year-on-year, on average, which is extremely buoyant. Should the business grow at a slower rate, it will become profitable at a later date than expected.
Underlying developments driving MUX’s growth isn’t the focus of this broad overview, but, 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 I wrap up, there’s one aspect worth mentioning. MUX has managed its capital judiciously, with debt making up 9.9% of equity. This means that MUX has predominantly funded its operations from equity capital,and its low debt obligation reduces the risk around investing in the loss-making company.
This article is not intended to be a comprehensive analysis on MUX, so if you are interested in understanding the company at a deeper level, take a look at MUX’s company page on Simply Wall St. I’ve also compiled a list of important aspects you should look at:
- Valuation: What is MUX 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 MUX 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 McEwen Mining’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.
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