IGO: FY2026 profit exists but was not earned, and revenue is falling

IGO's FY2026 report, for the year ended 30 June, shows revenue of AUD 462.9 million, down 9.7% year on year. Yet net profit for the reported period was 145.3 million and EBITDA was 72.3 million; a year earlier both figures were negative. The swing to profit against falling revenue looks contradictory, and the key question is what produced it. At the current price the share trades at 42.2 times earnings and 79.7 times EBITDA on the last twelve months, leaving no room for error – so the stock looks rather unattractive.

Key takeaways

— FY2026 revenue fell 9.7% to AUD 462.9 million

— EBITDA of 72.3 million replaced a loss a year earlier, but the 15.6% margin is still thin

— Net profit of 145.3 million is double EBITDA – the gap came from items below the operating line

— Net debt is negative: cash exceeds debt by 369.7 million

— Free cash flow over the last twelve months was 132.4 million, covering the dividend

— At 42.2 times earnings and 79.7 times EBITDA, the market is already pricing a strong recovery

Attractiveness

Key figures, AUD bn

FY2026 revenue fell 9.7% to AUD 462.9 million

IGO's revenue for the financial year ended 30 June 2026 was AUD 462.9 million, down 9.7% year on year. The decline is primarily due to lower prices for its products – nickel and lithium – and reduced sales volumes amid weak demand. The company did not disclose segment details in the report, so the exact contribution of each business remains unclear.

For a mining company, a 9.7% revenue decline with negative net debt is not a catastrophe, but it is not growth either. The market expects a recovery in lithium prices, and the current valuation already reflects those expectations. If prices do not turn, revenue will continue to fall, and the profit earned this year will prove one-off.

EBITDA of 72.3 million replaced a loss a year earlier, but the 15.6% margin is still thin

EBITDA for the reported period was AUD 72.3 million, with a margin of 15.6%. A year earlier EBITDA was negative, with a margin of minus 32.1%. The turnaround came from cost cuts and possibly one-off items, but the specific drivers are not detailed in the report. For a company with revenue of 462.9 million, a 15.6% margin means operational efficiency is still low.

Such a thin margin leaves no room for error: any decline in prices or rise in costs would push EBITDA back into negative territory. The question is how sustainable this improvement is. Without revenue growth, the company cannot maintain even this margin in the long term.

Net profit of 145.3 million is double EBITDA – the gap came from items below the operating line

Net profit for the reported period was AUD 145.3 million, double EBITDA. Such a gap means the company received significant income below the operating line – likely from asset revaluation, foreign exchange differences, or asset sales. Without these items, profit would have been substantially lower, and possibly negative.

A net margin of 31.4% against an EBITDA margin of 15.6% is an anomaly that cannot repeat year after year. Investors should understand that current profit does not reflect the operating efficiency of the business. For assessing the company's resilience, EBITDA and cash flow matter more than net profit.

Net debt is negative: cash exceeds debt by 369.7 million

IGO's net debt at the latest reporting date is negative, at minus AUD 369.7 million. This means cash and equivalents exceed debt obligations. The net debt to EBITDA ratio over the last twelve months is minus 5.11, confirming a strong balance sheet. Over the year, net debt decreased by AUD 0.1 billion.

Negative net debt is a safety cushion, but by itself it does not create value. The company can afford investments or dividends, but the market values its business, not its balance sheet. If operating performance does not improve, a strong balance sheet will only delay the inevitable.

Free cash flow over the last twelve months was 132.4 million, covering the dividend

Operating cash flow over the last twelve months was AUD 132.4 million. With a market capitalisation of 6.13 billion, this gives a cash flow yield of about 2.2%. The dividend yield over the last twelve months was 0.64%, well below the key rate and government bond yields. The company pays dividends, but they are not the main reason to invest.

Free cash flow covers the dividend, but after capital expenditures the buffer is thin. If product prices remain low, the company may cut payouts. For an income-oriented investor, this stock is not suitable – a 0.64% yield does not compensate for the risks of the mining sector.

At 42.2 times earnings and 79.7 times EBITDA, the market is already pricing a strong recovery

The price-to-earnings ratio over the last twelve months is 42.2, and the enterprise value to EBITDA ratio is 79.7. These are very high multiples, especially for a mining company with declining revenue. The market values IGO based on expectations of a sharp profit recovery, supported by negative net debt and a potential rebound in lithium prices.

However, current profit is largely driven by one-off factors, and if they do not repeat, the multiples will remain high. To justify the current price, the company needs to significantly increase EBITDA. Until that happens, the valuation looks stretched.

Valuation on the latest reported figures

Bottom line

IGO reported a net profit of AUD 145.3 million for FY2026, but it was not earned from operations: EBITDA was only 72.3 million, and revenue fell 9.7%. Negative net debt of 369.7 million and cash flow of 132.4 million give the company time, but do not create value. At 42.2 times earnings and 79.7 times EBITDA, the market is already pricing a strong recovery that is not yet visible. For an investor, the key question is whether IGO can grow EBITDA to a level that justifies the current valuation, and when.