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

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. The kr214m market-cap company posted a loss in its most recent financial year of kr28m and a latest trailing-twelve-month loss of kr32m leading to an even wider gap between loss and breakeven. The most pressing concern for investors is Sotkamo Silver's path to profitability – when will it breakeven? Below we will provide a high-level summary of the industry analysts’ expectations for the company.

View our latest analysis for Sotkamo Silver

Sotkamo Silver is bordering on breakeven, according to some Swedish Metals and Mining analysts. They anticipate the company to incur a final loss in 2022, before generating positive profits of kr10m in 2023. So, the company is predicted to breakeven approximately a year from now or less! How fast will the company have to grow to reach the consensus forecasts that anticipate breakeven by 2023? Working backwards from analyst estimates, it turns out that they expect the company to grow 26% year-on-year, on average, which is rather optimistic! Should the business grow at a slower rate, it will become profitable at a later date than expected.

Underlying developments driving Sotkamo Silver's growth isn’t the focus of this broad overview, however, take into account that by and large a metal and mining business has lumpy cash flows which are contingent on the natural resource mined and stage at which the company is operating. So, a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.

One thing we would like to bring into light with Sotkamo Silver is its relatively high level of debt. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, which in Sotkamo Silver's case is 97%. A higher level of debt requires more stringent capital management which increases the risk around investing in the loss-making company.

Next Steps:

There are too many aspects of Sotkamo Silver to cover in one brief article, but the key fundamentals for the company can all be found in one place – Sotkamo Silver's company page on Simply Wall St. We've also compiled a list of relevant aspects you should further examine:

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. 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.