Echo Resources Limited’s (ASX:EAR): Echo Resources Limited engages in the exploration and development of gold properties. The AU$127.06M market-cap posted a loss in its most recent financial year of -AU$30.76M and a latest trailing-twelve-month loss of -AU$33.43M leading to an even wider gap between loss and breakeven. Many investors are wondering the rate at which EAR will turn a profit, with the big question being “when will the company breakeven?” I’ve put together a brief outline of industry analyst expectations for EAR, its year of breakeven and its implied growth rate.
View our latest analysis for Echo Resources
EAR is bordering on breakeven, according to analysts. They expect the company to post a final loss in 2018, before turning a profit of AU$7.10M in 2019. Therefore, EAR is expected to breakeven roughly a few months from now. What rate will EAR have to grow year-on-year in order to breakeven on this date? Using a line of best fit, I calculated an average annual growth rate of 122.54%, which is rather optimistic! If this rate turns out to be too aggressive, EAR may become profitable much later than analysts predict.
Underlying developments driving EAR’s growth isn’t the focus of this broad overview, however, take into account that typically 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 I wrap up, there’s one aspect worth mentioning. EAR currently has no debt on its balance sheet, which is quite unusual for a cash-burning metals and mining company, which usually has a high level of debt relative to its equity. This means that EAR has been operating purely on its equity investment and has no debt burden. This aspect reduces the risk around investing in the loss-making company.
Next Steps:
There are key fundamentals of EAR which are not covered in this article, but I must stress again that this is merely a basic overview. For a more comprehensive look at EAR, take a look at EAR’s company page on Simply Wall St. I’ve also put together a list of relevant factors you should look at:
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Historical Track Record: What has EAR’s 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.
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Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Echo Resources’s board and the CEO’s back ground.
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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.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.