Loss-Making Sotkamo Silver AB (NGM:SOSI) Set To Breakeven

We feel now is a pretty good time to analyse Sotkamo Silver AB's (NGM:SOSI) business as it appears the company may be on the cusp of a considerable accomplishment. Sotkamo Silver AB, together with its subsidiaries, explores for and develops mineral deposits in the Nordic region. The kr662m market-cap company announced a latest loss of kr47m on 31 December 2020 for its most recent financial year result. Many investors are wondering about the rate at which Sotkamo Silver 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.

View our latest analysis for Sotkamo Silver

Expectations from some of the Swedish Metals and Mining analysts is that Sotkamo Silver is on the verge of breakeven. They expect the company to post a final loss in 2020, before turning a profit of kr50m 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 46% is expected, which is extremely buoyant. If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.

Underlying developments driving Sotkamo Silver's growth isn’t the focus of this broad overview, but, bear in mind that typically 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 debt-to-equity ratio of 123%. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, which in this case, the company has significantly overshot. Note that a higher debt obligation increases the risk in investing in the loss-making company.

Next Steps:

There are key fundamentals of Sotkamo Silver which are not covered in this article, but we must stress again that this is merely a basic overview. For a more comprehensive look at Sotkamo Silver, take a look at Sotkamo Silver's company page on Simply Wall St. We've also compiled a list of relevant factors you should further research:

1. 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.
2. 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.
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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