Breakeven On The Horizon For Ionic Rare Earths Limited (ASX:IXR)Simply Wall StJuly 30, 2024
We feel now is a pretty good time to analyse
Ionic Rare Earths Limited's (ASX:IXR) business as it appears the company may be on the cusp of a considerable accomplishment. Ionic Rare Earths Limited operates as a mineral exploration company. The AU$44m market-cap company posted a loss in its most recent financial year of AU$8.5m and a latest trailing-twelve-month loss of AU$19m leading to an even wider gap between loss and breakeven. As path to profitability is the topic on Ionic Rare Earths' 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.
Ionic Rare Earths is bordering on breakeven, according to the 2 Australian Metals and Mining analysts. They anticipate the company to incur a final loss in 2025, before generating positive profits of AU$39m in 2026. The company is therefore projected to breakeven around 2 years from today. In order to meet this breakeven date, we calculated the rate at which the company must grow year-on-year. It turns out an average annual growth rate of 45% is expected, which is rather optimistic! If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.
View attachment 6382077ASX:IXR Earnings Per Share Growth July 30th 2024
Given this is a high-level overview, we won’t go into details of Ionic Rare Earths' upcoming projects, though, take into account that by and large 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.
Before we wrap up, there’s one aspect worth mentioning. Ionic Rare Earths currently has no debt on its balance sheet, which is rare for a loss-making metals and mining company, which typically has high 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.
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