When Will Firestone Diamonds plc (LON:FDI) Breakeven?

Firestone Diamonds plc's (LON:FDI): Firestone Diamonds plc mines, explores for, and develops diamond properties in Lesotho and Botswana. The UK£4.8m market-cap company announced a latest loss of -US$44.1m on 30 June 2019 for its most recent financial year result. Many investors are wondering the rate at which FDI will turn a profit, with the big question being “when will the company breakeven?” Below I will provide a high-level summary of the industry analysts’ expectations for FDI.

See our latest analysis for Firestone Diamonds

According to the 2 industry analysts covering FDI, the consensus is breakeven is near. They expect the company to post a final loss in 2020, before turning a profit of US$1.4m in 2021. So, FDI is predicted to breakeven approximately a couple of months from now! What rate will FDI have to grow year-on-year in order to breakeven on this date? Using a line of best fit, I calculated an average annual growth rate of 98%, which is extremely buoyant. Should the business grow at a slower rate, it will become profitable at a later date than expected.

AIM:FDI Past and Future Earnings, January 29th 2020

I’m not going to go through company-specific developments for FDI given that this is a high-level summary, however, bear in mind that generally 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 I wrap up, there’s one issue worth mentioning. FDI currently has negative equity on its balance sheet. This can sometimes arise from accounting methods used to deal with accumulated losses from prior years, which are viewed as liabilities carried forward until it cancels out in the future. Oftentimes, losses exist only on paper but other times, it can be a red flag.

Next Steps:

There are too many aspects of FDI to cover in one brief article, but the key fundamentals for the company can all be found in one place – FDI’s company page on Simply Wall St. I’ve also put together a list of pertinent aspects you should look at:

1. Valuation: What is FDI 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 FDI 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 Firestone Diamonds’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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