We feel now is a pretty good time to analyse Sigma Lithium Corporation's (NASDAQ:SGML) business as it appears the company may be on the cusp of a considerable accomplishment. Sigma Lithium Corporation engages in the exploration and development of lithium deposits in Brazil. The US$1.4b market-cap company posted a loss in its most recent financial year of CA$38m and a latest trailing-twelve-month loss of CA$18m shrinking the gap between loss and breakeven. 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?" Below we will provide a high-level summary of the industry analysts' expectations for the company.

Consensus from 5 of the American Metals and Mining analysts is that Sigma Lithium is on the verge of breakeven. They expect the company to post a final loss in 2023, before turning a profit of CA$54m in 2024. 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 94%, which is rather optimistic! 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 Sigma Lithium given that this is a high-level summary, but, bear in mind that generally 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. This means that a high growth rate is not unusual, especially if the company is currently in an investment period.

Before we wrap up, there's one issue worth mentioning. Sigma Lithium currently has a debt-to-equity ratio of 133%. Generally, the rule of thumb is 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 Sigma Lithium 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 Sigma Lithium, take a look at Sigma Lithium's company page on Simply Wall St. We've also put together a list of important aspects you should further research:

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com