Sherritt International Corporation (TSE:S) Has Found A Path To Profitability

Sherritt International Corporation (TSE:S) is possibly approaching a major achievement in its business, so we would like to shine some light on the company. Sherritt International Corporation engages in the mining, refining, and sale of nickel and cobalt from lateritic sources primarily in Canada and Cuba. The CA$322m market-cap company announced a latest loss of CA$13m on 31 December 2021 for its most recent financial year result. As path to profitability is the topic on Sherritt International's investors mind, we've decided to gauge market sentiment. In this article, we will touch on the expectations for the company's growth and when analysts expect it to become profitable.

See our latest analysis for Sherritt International

According to the 3 industry analysts covering Sherritt International, the consensus is that breakeven is near. They anticipate the company to incur a final loss in 2021, before generating positive profits of CA$61m in 2022. The company is therefore projected to breakeven around 12 months 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 27% 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, but, take into account that typically 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. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, which in Sherritt International's case is 76%. Note that a higher debt obligation 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 pertinent aspects 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. 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.