When Will Arizona Lithium Limited (ASX:AZL) Become Profitable?

With the business potentially at an important milestone, we thought we'd take a closer look at Arizona Lithium Limited's (ASX:AZL) future prospects. Arizona Lithium Limited operates as a mineral exploration company in the United States. On 30 June 2023, the AU$88m market-cap company posted a loss of AU$14m for its most recent financial year. Many investors are wondering about the rate at which Arizona Lithium will turn a profit, with the big question being “when will the company breakeven?” In this article, we will touch on the expectations for the company's growth and when analysts expect it to become profitable.

Check out our latest analysis for Arizona Lithium

Arizona Lithium is bordering on breakeven, according to some Australian Metals and Mining analysts. They anticipate the company to incur a final loss in 2025, before generating positive profits of AU$14m in 2026. Therefore, the company is expected to breakeven roughly 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 86% is expected, which is extremely buoyant. Should the business grow at a slower rate, it will become profitable at a later date than expected.

Underlying developments driving Arizona Lithium's growth isn’t the focus of this broad overview, 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.

One thing we’d like to point out is that Arizona Lithium has no debt on its balance sheet, which is quite unusual for a cash-burning metals and mining company, which usually has a high level of 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.

Next Steps:

This article is not intended to be a comprehensive analysis on Arizona Lithium, so if you are interested in understanding the company at a deeper level, take a look at Arizona Lithium's company page on Simply Wall St. We've also compiled a list of pertinent aspects you should look at:

1. Valuation: What is Arizona Lithium 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 Arizona Lithium 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 Arizona Lithium’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.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.