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 company’s loss has widened recently since it announced a loss of A$2.9m for the full year, compared to the last loss of A$6.1m on the twelve months, pushing it further out of balance. The most pressing concern for investors is Lake Resources’ path to profitability – when will it break even? We’ve put together a brief overview of industry analysts’ expectations for the company, its year of profitability and its implied growth rate.
Check out our latest analysis for Lake Resources
According to the 4 industry analysts covering Lake Resources, the consensus is that the break-even point is near. They expect the company to make a terminal loss in 2023, before making a profit of A$1.1 million in 2024. Thus, the company is expected to break even in about 2 years 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 94%, which is extremely dynamic. If this rate turns out to be too aggressive, the company could become profitable much later than analysts predict.
The developments underlying the growth of Lake Resources are not the focus of this general overview, however, keep in mind that a metals and mining business typically has erratic cash flows that are dependent on the natural resource being mined and the stage at which the business operates. This means that the significant growth rates ahead are not abnormal as the company begins to reap the benefits of past investments.
One thing we would like to point out is that Lake Resources has zero debt on its balance sheet, which is quite unusual for a cash-intensive metals and mining company, which typically has a high level of debt per relative to its equity. This means that the company has operated solely on its equity investment and has no debt. This aspect reduces the risk associated with investing in the loss-making company.
There are too many aspects of Lake Resources to cover in a brief article, but the company fundamentals can all be found in one place – Lake Resources’ company page on Simply Wall St. We have also compiled a list of relevant information factors that you should consider:
- 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.
- 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.
- 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.
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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.