Analysts Expect Sherritt International Corporation (TSE:S) To Breakeven Soon

We feel now is a pretty good time to analyse Sherritt International Corporation's (TSE:S) business as it appears the company may be on the cusp of a considerable accomplishment. Sherritt International Corporation engages in the mining, refining, and sale of nickel and cobalt from lateritic ores primarily in Europe, Japan, and China. The CA$258m market-cap company announced a latest loss of CA$86m on 31 December 2020 for its most recent financial year result. Many investors are wondering about the rate at which Sherritt International will turn a profit, with the big question being “when will the company breakeven?” Below we will provide a high-level summary of the industry analysts’ expectations for the company.

See our latest analysis for Sherritt International

Sherritt International is bordering on breakeven, according to the 2 Canadian Metals and Mining analysts. They expect the company to post a final loss in 2020, before turning a profit of CA$39m in 2021. Therefore, the company is expected to breakeven roughly a year from now or less! We calculated the rate at which the company must grow to meet the consensus forecasts predicting breakeven within 12 months. It turns out an average annual growth rate of 36% is expected, which is rather optimistic! Should the business grow at a slower rate, it will become profitable at a later date than expected.

We're not going to go through company-specific developments for Sherritt International given that this is a high-level summary, though, take into account that by and large metals and mining companies, depending on the stage of operation and metals mined, have irregular periods of cash flow. This means that a high growth rate is not unusual, especially if the company is currently in an investment period.

Before we wrap up, there’s one issue worth mentioning. Sherritt International currently has a relatively high level of debt. Typically, debt shouldn’t exceed 40% of your equity, which in Sherritt International's case is 72%. 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 Sherritt International, so if you are interested in understanding the company at a deeper level, take a look at Sherritt International's company page on Simply Wall St. We've also put together a list of essential factors you should look at:

1. Valuation: What is Sherritt International 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 Sherritt International 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 Sherritt International’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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