In This Article:
Rainbow Rare Earths Limited (LON:RBW) is possibly approaching a major achievement in its business, so we would like to shine some light on the company. Rainbow Rare Earths Limited engages in the development of rare earth minerals projects. The UK£72m market-cap company posted a loss in its most recent financial year of US$12m and a latest trailing-twelve-month loss of US$12m shrinking the gap between loss and breakeven. Many investors are wondering about the rate at which Rainbow Rare Earths 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.
Check out our latest analysis for Rainbow Rare Earths
Rainbow Rare Earths is bordering on breakeven, according to the 2 British Metals and Mining analysts. They expect the company to post a final loss in 2026, before turning a profit of US$80m in 2027. The company is therefore projected to breakeven around 3 years from today. What rate will the company have to grow year-on-year in order to breakeven on this date? Using a line of best fit, we calculated an average annual growth rate of 91%, which signals high confidence from analysts. If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.
Given this is a high-level overview, we won’t go into details of Rainbow Rare Earths' upcoming projects, but, take into account 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, large upcoming growth rates are not abnormal as the company is beginning to reap the benefits of earlier investments.
Before we wrap up, there’s one aspect worth mentioning. The company has managed its capital prudently, with debt making up 3.3% of equity. This means that it has predominantly funded its operations from equity capital, and its low debt obligation reduces the risk around investing in the loss-making company.
Next Steps:
This article is not intended to be a comprehensive analysis on Rainbow Rare Earths, so if you are interested in understanding the company at a deeper level, take a look at Rainbow Rare Earths' company page on Simply Wall St. We've also put together a list of pertinent aspects you should look at:
-
Historical Track Record: What has Rainbow Rare Earths' 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.
-
Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Rainbow Rare Earths' board and the CEO’s background.
-
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.