We Might See A Profit From Steppe Gold Ltd. (TSE:STGO) Soon

We feel now is a pretty good time to analyse Steppe Gold Ltd.'s (TSE:STGO) business as it appears the company may be on the cusp of a considerable accomplishment. Steppe Gold Ltd. explores for and develops precious metals in Mongolia and Canada. With the latest financial year loss of US$5.2m and a trailing-twelve-month loss of US$9.3m, the CA$159m market-cap company amplified its loss by moving further away from its breakeven target. The most pressing concern for investors is Steppe Gold's path to profitability – when will it breakeven? We've put together a brief outline of industry analyst expectations for the company, its year of breakeven and its implied growth rate.

See our latest analysis for Steppe Gold

Consensus from 2 of the Canadian Metals and Mining analysts is that Steppe Gold is on the verge of breakeven. They anticipate the company to incur a final loss in 2019, before generating positive profits of US$14m in 2020. So, the company is predicted to breakeven approximately 12 months from now or less. We calculated the rate at which the company must grow to meet the consensus forecasts predicting breakeven within 12 months. It turns out an average annual growth rate of 102% is expected, which is extremely buoyant. If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.

earnings-per-share-growth

Underlying developments driving Steppe Gold's growth isn’t the focus of this broad overview, however, keep in mind 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 we would like to bring into light with Steppe Gold is its debt-to-equity ratio of over 2x. Generally, the rule of thumb is 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 Steppe Gold, so if you are interested in understanding the company at a deeper level, take a look at Steppe Gold's company page on Simply Wall St. We've also put together a list of important aspects you should look at:

1. Valuation: What is Steppe 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 Steppe 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 Steppe 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.

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