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Guanajuato Silver Company Ltd. (CVE:GSVR) is possibly approaching a major achievement in its business, so we would like to shine some light on the company. Guanajuato Silver Company Ltd. engages in reactivating, mining, and producing precious metals in central Mexico. The CA$78m market-cap company posted a loss in its most recent financial year of US$32m and a latest trailing-twelve-month loss of US$23m shrinking the gap between loss and breakeven. The most pressing concern for investors is Guanajuato Silver's path to profitability – when will it breakeven? We've put together a brief outline of industry analyst expectations for the company, its year of breakeven and its implied growth rate.
Expectations from some of the Canadian Metals and Mining analysts is that Guanajuato Silver is on the verge of breakeven. They anticipate the company to incur a final loss in 2024, before generating positive profits of US$3.1k in 2025. So, the company is predicted to breakeven approximately 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 106% 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.
Underlying developments driving Guanajuato Silver's growth isn’t the focus of this broad overview, though, keep in mind that generally metals and mining companies, depending on the stage of operation and metals mined, have irregular periods of cash flow. This means, large upcoming growth rates are not abnormal as the company is beginning to reap the benefits of earlier investments.
See our latest analysis for Guanajuato Silver
Before we wrap up, there’s one issue worth mentioning. Guanajuato Silver currently has a debt-to-equity ratio of over 2x. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, which in this case, the company has significantly overshot. 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 Guanajuato Silver, so if you are interested in understanding the company at a deeper level, take a look at Guanajuato Silver's company page on Simply Wall St. We've also put together a list of pertinent factors you should look at: