Lake Resources NL (ASX: LKE) turns from loss to profit


We think it’s a good time to analyze Lake Resources NL (ASX:LKE) As it seems, the company may be on the verge of a huge achievement. Lake Resources NL explores and develops lithium brine projects in Argentina. The A$911 million market capitalization company recorded a loss of A$2.9 million in its last financial year and a final loss of A$6.1 million over the last twelve months, which has resulted in an even wider gap between the loss and the break-even point. Many investors are wondering about the rate at which Lake Resources will make a profit, with the big question being “when will the company break even?” In this article, we’ll discuss the company’s growth expectations and when analysts expect it to become profitable.

See our latest analysis for Lake Resources

The consensus of 2 of Australia’s metals and mining analysts is that Lake Resources is close to breaking even. They expect the business to make a terminal loss in 2023, before making a profit of A$1.6 million in 2024. Therefore, the business is expected to break even in about 2 years to from today. How fast will the business need to grow year over year to break even by that date? Using a line of best fit, we calculated an average annual growth rate of 99%, which is extremely dynamic. If this rate turns out to be too aggressive, the company could become profitable much later than analysts predict.

ASX: Earnings Growth per LKE Share July 11, 2022

Since this is a high-level overview, we won’t go into details about Lake Resources’ upcoming projects, but take into account that in general, a metals and mining company has flows irregular cash flows that depend on the natural resource being extracted and the stage at which the business is operating. This means that a high growth rate is not unusual, especially if the company is currently in an investment period.

Before concluding, there is one aspect worth mentioning. Lake Resources currently has no debt on its balance sheet, which is quite unusual for a cash-intensive mining and metals company, which typically has a high level of debt relative to its equity. This means that the business has operated solely on its equity investment and has no debt. This aspect reduces the risk associated with investing in the loss-making company.

Next steps:

This article is not intended to be a full analysis on Lake Resources, so if you’re interested in understanding the company on a deeper level, take a look at Lake Resources’ company page on Simply Wall St. We have also compiled a list of important aspects you should consider:

  1. Evaluation: What is Lake Resources worth today? Has future growth potential already been factored into the price? The intrinsic value infographic in our free research report helps visualize whether Lake Resources is currently being mispriced by the market.
  2. Management team: An experienced management team at the helm increases our confidence in the company – take a look at who sits on Lake Resources’ board and the CEO’s background.
  3. Other High Performing Stocks: Are there other stocks that offer better prospects with a proven track record? Explore our free list of these great stocks here.

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.


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