Sigma Lithium Corporation (NASDAQ:SGML) is possibly approaching a major achievement in its business, so we would like to shine some light on the company. Sigma Lithium Corporation engages in the exploration and development of lithium deposits in Brazil. On 31 December 2023, the US$1.8b market-cap company posted a loss of CA$38m for its most recent financial year. Many investors are wondering about the rate at which Sigma Lithium will turn a profit, with the big question being “when will the company breakeven?” In this article, we will touch on the expectations for the company's growth and when analysts expect it to become profitable.

View our latest analysis for Sigma Lithium

According to the 5 industry analysts covering Sigma Lithium, the consensus is that breakeven is near. They expect the company to post a final loss in 2024, before turning a profit of CA$82m in 2025. Therefore, the company is expected to breakeven just over a year from now. What rate will the company have to grow year-on-year in order to breakeven on this date? Using a line of best fit, we calculated an average annual growth rate of 145%, 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 Sigma Lithium's growth isn’t the focus of this broad overview, however, keep in mind that typically 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 Sigma Lithium is its relatively high level of debt. Typically, debt shouldn’t exceed 40% of your equity, which in Sigma Lithium's case is 80%. Note that a higher debt obligation increases the risk in investing in the loss-making company.

Next Steps:

This article is not intended to be a comprehensive analysis on Sigma Lithium, so if you are interested in understanding the company at a deeper level, take a look at Sigma Lithium's company page on Simply Wall St. We've also put together a list of key aspects you should look at:

1. Valuation: What is Sigma Lithium 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 Sigma Lithium 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 Sigma Lithium’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.