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When Will Chaarat Gold Holdings Limited (LON:CGH) Turn A Profit?

We feel now is a pretty good time to analyse Chaarat Gold Holdings Limited's (LON:CGH) business as it appears the company may be on the cusp of a considerable accomplishment. Chaarat Gold Holdings Limited operates as a gold mining company. The company’s loss has recently broadened since it announced a US$29m loss in the full financial year, compared to the latest trailing-twelve-month loss of US$31m, moving it further away from breakeven. As path to profitability is the topic on Chaarat Gold Holdings' investors mind, we've decided to gauge market sentiment. Below we will provide a high-level summary of the industry analysts’ expectations for the company.

See our latest analysis for Chaarat Gold Holdings

Consensus from 2 of the British Metals and Mining analysts is that Chaarat Gold Holdings is on the verge of breakeven. They expect the company to post a final loss in 2022, before turning a profit of US$43m in 2023. Therefore, the company is expected to breakeven roughly 3 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 75% is expected, 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.

earnings-per-share-growth
earnings-per-share-growth

We're not going to go through company-specific developments for Chaarat Gold Holdings given that this is a high-level summary, however, take into account 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. This means that a high growth rate is not unusual, especially if the company is currently in an investment period.

Before we wrap up, there’s one issue worth mentioning. Chaarat Gold Holdings 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. Note that a higher debt obligation increases the risk in investing in the loss-making company.

Next Steps:

There are key fundamentals of Chaarat Gold Holdings 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 Chaarat Gold Holdings, take a look at Chaarat Gold Holdings' company page on Simply Wall St. We've also put together a list of essential factors you should further examine:

  1. Valuation: What is Chaarat Gold Holdings 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 Chaarat Gold Holdings is currently mispriced by the market.

  2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Chaarat Gold Holdings’s board and the CEO’s background.

  3. 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.

This article by Simply Wall St is general in nature. 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.

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