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With the business potentially at an important milestone, we thought we'd take a closer look at Burgundy Diamond Mines Limited's (ASX:BDM) future prospects. Burgundy Diamond Mines Limited, a resources company, focuses on the mining, production, cutting, polishing, grading, and sale of diamonds. On 31 December 2023, the AU$99m market-cap company posted a loss of US$1.4m for its most recent financial year. Many investors are wondering about the rate at which Burgundy Diamond Mines will turn a profit, with the big question being “when will the company breakeven?” We've put together a brief outline of industry analyst expectations for the company, its year of breakeven and its implied growth rate.
View our latest analysis for Burgundy Diamond Mines
According to some industry analysts covering Burgundy Diamond Mines, breakeven is near. They expect the company to post a final loss in 2024, before turning a profit of US$43m in 2025. The company is therefore projected to breakeven around 12 months from now or less. How fast will the company have to grow to reach the consensus forecasts that anticipate breakeven by 2025? Working backwards from analyst estimates, it turns out that they expect the company to grow 30% 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 Burgundy Diamond Mines given that this is a high-level summary, however, bear in mind that generally a metal and mining business has lumpy cash flows which are contingent on the natural resource mined and stage at which the company is operating. This means that a high growth rate is not unusual, especially if the company is currently in an investment period.
One thing we would like to bring into light with Burgundy Diamond Mines is its relatively high level of debt. Typically, debt shouldn’t exceed 40% of your equity, which in Burgundy Diamond Mines' case is 61%. A higher level of debt requires more stringent capital management which increases the risk in investing in the loss-making company.
Next Steps:
This article is not intended to be a comprehensive analysis on Burgundy Diamond Mines, so if you are interested in understanding the company at a deeper level, take a look at Burgundy Diamond Mines' company page on Simply Wall St. We've also compiled a list of relevant aspects you should further examine:
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Valuation: What is Burgundy Diamond Mines 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 Burgundy Diamond Mines is currently mispriced by the market.
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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 Burgundy Diamond Mines’s board and the CEO’s background.
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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.
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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.