We feel now is a pretty good time to analyse Syrah Resources Limited's (ASX:SYR) business as it appears the company may be on the cusp of a considerable accomplishment. Syrah Resources Limited, together with its subsidiaries, engages in the exploration, evaluation, and development of mineral properties in Mozambique. The AU$1.2b market-cap company announced a latest loss of US$57m on 31 December 2021 for its most recent financial year result. As path to profitability is the topic on Syrah Resources' investors mind, we've decided to gauge market sentiment. Below we will provide a high-level summary of the industry analysts’ expectations for the company.
According to the 2 industry analysts covering Syrah Resources, the consensus is that breakeven is near. They anticipate the company to incur a final loss in 2022, before generating positive profits of US$25m in 2023. Therefore, the company is expected 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 101% 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.
Given this is a high-level overview, we won’t go into details of Syrah Resources' upcoming projects, however, keep in mind that by and large 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.
Before we wrap up, there’s one aspect worth mentioning. The company has managed its capital judiciously, with debt making up 24% of equity. This means that it 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 Syrah Resources, so if you are interested in understanding the company at a deeper level, take a look at Syrah Resources' company page on Simply Wall St. We've also put together a list of relevant factors you should look at:
Historical Track Record: What has Syrah Resources' performance been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Syrah Resources' 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.
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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.