Yahoo Finance Scotgold Resources Limited (LON:SGZ): Is Breakeven Near?
We feel now is a pretty good time to analyse Scotgold Resources Limited's (LON:SGZ) business as it appears the company may be on the cusp of a considerable accomplishment. Scotgold Resources Limited engages in the mine development and mineral exploration businesses in Australia, Scotland, France, and Portugal. The company’s loss has recently broadened since it announced a AU$5.0m loss in the full financial year, compared to the latest trailing-twelve-month loss of AU$8.2m, moving it further away from breakeven. The most pressing concern for investors is Scotgold Resources' path to profitability – when will it breakeven? Below we will provide a high-level summary of the industry analysts’ expectations for the company.
View our latest analysis for Scotgold Resources
Consensus from 2 of the British Metals and Mining analysts is that Scotgold Resources is on the verge of breakeven. They expect the company to post a final loss in 2022, before turning a profit of AU$18m in 2023. So, the company is predicted to breakeven just over a year from today. How fast will the company have to grow each year in order to reach the breakeven point by 2023? Working backwards from analyst estimates, it turns out that they expect the company to grow 104% year-on-year, on average, which signals high confidence from analysts. 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 Scotgold Resources given that this is a high-level summary, however, bear in mind that typically metals and mining companies, depending on the stage of operation and metals mined, have irregular periods of cash flow. 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. Scotgold Resources currently has a relatively high level of debt. Typically, debt shouldn’t exceed 40% of your equity, which in Scotgold Resources' case is 56%. A higher level of debt requires more stringent capital management which increases the risk in investing in the loss-making company.
Next Steps:
There are too many aspects of Scotgold Resources to cover in one brief article, but the key fundamentals for the company can all be found in one place – Scotgold Resources' company page on Simply Wall St. We've also compiled a list of important aspects you should look at:
Valuation: What is Scotgold Resources 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 Scotgold Resources 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 Scotgold Resources’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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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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