With the business potentially at an important milestone, we thought we'd take a closer look at VHM Limited's (ASX:VHM) future prospects. VHM Limited engages in the exploration and development of mineral properties in Australia. The AU$157m market-cap company posted a loss in its most recent financial year of AU$9.1m and a latest trailing-twelve-month loss of AU$15m leading to an even wider gap between loss and breakeven. As path to profitability is the topic on VHM's investors mind, we've decided to gauge market sentiment. In this article, we will touch on the expectations for the company's growth and when analysts expect it to become profitable.
Check out our latest analysis for VHM
VHM is bordering on breakeven, according to some Australian Metals and Mining analysts. They anticipate the company to incur a final loss in 2024, before generating positive profits of AU$54m in 2025. The company is therefore projected to breakeven around 2 years from today. How fast will the company have to grow each year in order to reach the breakeven point by 2025? Working backwards from analyst estimates, it turns out that they expect the company to grow 123% year-on-year, on average, which is extremely buoyant. 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 VHM's upcoming projects, but, keep in mind that typically 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. So, a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.
Before we wrap up, there’s one aspect worth mentioning. VHM currently has no debt on its balance sheet, which is rare for a loss-making metals and mining company, which usually has a high level of debt relative to its equity. This means that the company 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 VHM which are not covered in this article, but we must stress again that this is merely a basic overview. For a more comprehensive look at VHM, take a look at VHM's company page on Simply Wall St. We've also put together a list of essential aspects you should further research:
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Historical Track Record: What has VHM'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 VHM'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.