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We Might See A Profit From Lundin Gold Inc. (TSE:LUG) Soon

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·3 min read
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We feel now is a pretty good time to analyse Lundin Gold Inc.'s (TSE:LUG) business as it appears the company may be on the cusp of a considerable accomplishment. Lundin Gold Inc. operates as a mining company in Canada. On 31 December 2020, the CA$2.8b market-cap company posted a loss of US$47m for its most recent financial year. Many investors are wondering about the rate at which Lundin Gold will turn a profit, with the big question being “when will the company breakeven?” Below we will provide a high-level summary of the industry analysts’ expectations for the company.

Check out our latest analysis for Lundin Gold

Consensus from 5 of the Canadian Metals and Mining analysts is that Lundin Gold is on the verge of breakeven. They anticipate the company to incur a final loss in 2020, before generating positive profits of US$144m in 2021. The company is therefore projected to breakeven around 12 months from now or less. How fast will the company have to grow to reach the consensus forecasts that anticipate breakeven by 2021? Working backwards from analyst estimates, it turns out that they expect the company to grow 42% year-on-year, on average, which signals high confidence from analysts. If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.

earnings-per-share-growth
earnings-per-share-growth

Underlying developments driving Lundin Gold's growth isn’t the focus of this broad overview, however, take into account that typically 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 Lundin Gold is its debt-to-equity ratio of 146%. Typically, debt shouldn’t exceed 40% of your equity, and the company has considerably exceeded this. Note that a higher debt obligation increases the risk in 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 key factors you should further examine:

  1. 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.

  2. 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.

  3. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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