Thursday, August 5, 2021
*Gold

Market Sentiment Around Loss-Making Endeavour Mining Corporation (TSE:EDV)

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Endeavour Mining Corporation ( TSE:EDV ) operates as an intermediate gold producer in West Africa. With the latest financial year loss of US$159.3m and a trailing-twelve month loss of US$118.7m, the CA$5.2b market-cap alleviates its loss by moving closer towards its target of breakeven. As path to profitability is the topic on EDV’s investors mind, I’ve decided to gauge market sentiment. In this article, I will touch on the expectations for EDV’s growth and when analysts expect the company to become profitable.

According to the 10 industry analysts covering EDV, the consensus is breakeven is near. They expect the company to post a final loss in 2019, before turning a profit of US$236m in 2020. Therefore, EDV is expected to breakeven roughly a few months from now. In order to meet this breakeven date, I calculated the rate at which EDV must grow year-on-year. It turns out an average annual growth rate of 35% 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.

earnings-per-share-growth
earnings-per-share-growth
Given this is a high-level overview, I won’t go into details of EDV’s upcoming projects, but, keep in mind that generally metals and mining companies, depending on the stage of operation and metals mined, have irregular periods of cash flow. So, a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.

One thing I would like to bring into light with EDV is its relatively high level of debt. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, which in EDV’s case is 89%. A higher level of debt requires more stringent capital management which increases the risk in investing in the loss-making company.

Next Steps:

There are key fundamentals of EDV 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 EDV, take a look at EDV’s company page on Simply Wall St . I’ve also compiled a list of pertinent aspects you should further research:

  1. Valuation : What is EDV 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 EDV 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 Endeavour Mining’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 .

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