When Can We Expect A Profit From SunOpta Inc. (TSE:SOY)?

SunOpta Inc. (TSE:SOY) is possibly approaching a major achievement in its business, so we would like to shine some light on the company. SunOpta Inc. manufactures and sells plant-based and fruit-based food and beverage products to retail customers, foodservice distributors, branded food companies, and food manufacturers; and sources and produces organic and non-genetically modified (non-GMO) ingredients for food industry worldwide. The CA$1.7b market-cap company posted a loss in its most recent financial year of US$8.8m and a latest trailing-twelve-month loss of US$11m leading to an even wider gap between loss and breakeven. As path to profitability is the topic on SunOpta's investors mind, we've decided to gauge market sentiment. We've put together a brief outline of industry analyst expectations for the company, its year of breakeven and its implied growth rate.

View our latest analysis for SunOpta

Consensus from 4 of the Canadian Food analysts is that SunOpta is on the verge of breakeven. They anticipate the company to incur a final loss in 2021, before generating positive profits of US$377k in 2022. Therefore, the company is expected to breakeven just over a year from now. How fast will the company have to grow each year in order to reach the breakeven point by 2022? Working backwards from analyst estimates, it turns out that they expect the company to grow 54% year-on-year, on average, which is rather optimistic! If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.

We're not going to go through company-specific developments for SunOpta given that this is a high-level summary, but, bear in mind that generally a high forecast growth rate is not unusual for a company that is currently undergoing an investment period.

Before we wrap up, there’s one issue worth mentioning. SunOpta currently has a debt-to-equity ratio of 172%. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, which in this case, the company has significantly overshot. A higher level of debt requires more stringent capital management which increases the risk around investing in the loss-making company.

Next Steps:

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

1. Historical Track Record: What has SunOpta's performance been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on SunOpta'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. 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.
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