Sotkamo Silver AB's (NGM:SOSI) Shift From Loss To Profit

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 kr512m market-cap company’s loss lessened since it announced a kr101m loss in the full financial year, compared to the latest trailing-twelve-month loss of kr73m, as it approaches breakeven. 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.

View our latest analysis for Sotkamo Silver

According to some industry analysts covering Sotkamo Silver, breakeven is near. They expect the company to post a final loss in 2020, before turning a profit of kr49m in 2021. So, the company is predicted to breakeven just over a year from today. In order to meet this breakeven date, we calculated the rate at which the company must grow year-on-year. It turns out an average annual growth rate of 76% is expected, which is rather optimistic! If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.

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 debt-to-equity ratio of 110%. Typically, debt shouldn’t exceed 40% of your equity, and the company has considerably exceeded this. A higher level of debt requires more stringent capital management which 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 put together a list of pertinent 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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