With the business potentially at an important milestone, we thought we'd take a closer look at Sotkamo Silver AB's (NGM:SOSI) future prospects. Sotkamo Silver AB, together with its subsidiaries, engages in the exploration and development of mineral deposits. On 31 December 2021, the kr321m market-cap company posted a loss of kr17m for its most recent financial year. As path to profitability is the topic on Sotkamo Silver's investors mind, we've decided to gauge market sentiment. Below we will provide a high-level summary of the industry analysts’ expectations for the company.
According to some industry analysts covering Sotkamo Silver, breakeven is near. They anticipate the company to incur a final loss in 2021, before generating positive profits of kr31m in 2022. Therefore, the company is expected to breakeven roughly a year from now or less! At what rate will the company have to grow in order to realise the consensus estimates forecasting breakeven in under 12 months? Using a line of best fit, we calculated an average annual growth rate of 45%, which is extremely buoyant. 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 Sotkamo Silver given that this is a high-level summary, but, bear in mind that generally metals and mining companies, depending on the stage of operation and metals mined, have irregular periods of cash flow. This means, large upcoming growth rates are not abnormal as the company is beginning to reap the benefits of earlier investments.
One thing we would like to bring into light with Sotkamo Silver is its relatively high level of debt. Typically, debt shouldn’t exceed 40% of your equity, which in Sotkamo Silver's case is 100%. A higher level of debt requires more stringent capital management which increases the risk in investing in the loss-making company.
This article is not intended to be a comprehensive analysis on Sotkamo Silver, so if you are interested in understanding the company at a deeper level, take a look at Sotkamo Silver's company page on Simply Wall St. We've also compiled a list of essential aspects you should look at:
- Valuation: What is Sotkamo Silver 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 Sotkamo Silver is currently mispriced by the market.
- Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Sotkamo Silver’s board and the CEO’s background.
- 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.
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.