Danakali Limited's (ASX:DNK) Shift From Loss To Profit

Danakali Limited's (ASX:DNK): Danakali Limited engages in the exploration of minerals in Eritera, East Africa. The AU$112m market-cap company announced a latest loss of -AU$3.1m on 31 December 2019 for its most recent financial year result. As path to profitability is the topic on DNK’s investors mind, I’ve decided to gauge market sentiment. In this article, I will touch on the expectations for DNK’s growth and when analysts expect the company to become profitable.

Check out our latest analysis for Danakali

According to the 3 industry analysts covering DNK, the consensus is breakeven is near. They anticipate the company to incur a final loss in 2021, before generating positive profits of AU$24m in 2022. So, DNK is predicted to breakeven approximately 2 years from now. In order to meet this breakeven date, I calculated the rate at which DNK must grow year-on-year. It turns out an average annual growth rate of 78% is expected, which signals high confidence from analysts. Should the business grow at a slower rate, it will become profitable at a later date than expected.

Given this is a high-level overview, I won’t go into details of DNK’s upcoming projects, though, take into account that typically a high forecast growth rate is not unusual for a company that is currently undergoing an investment period.

One thing I’d like to point out is that DNK has no debt on its balance sheet, which is quite unusual for a cash-burning loss-making, growth company, which usually has a high level of debt relative to its equity. DNK currently operates purely off its shareholder funding and has no debt obligation, reducing concerns around repayments and making it a less risky investment.

Next Steps:

There are key fundamentals of DNK which are not covered in this article, but I must stress again that this is merely a basic overview. For a more comprehensive look at DNK, take a look at DNK’s company page on Simply Wall St. I’ve also compiled a list of key factors you should further research:

1. Valuation: What is DNK 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 DNK 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 Danakali’s board and the CEO’s back ground.

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.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.

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