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We feel now is a pretty good time to analyse SunOpta Inc.'s (TSE:SOY) business as it appears the company may be on the cusp of a considerable accomplishment. SunOpta Inc. manufactures and sells plant-based and fruit-based food and beverage products to retail customers, foodservice distributors, branded food companies, and food manufacturers; and sources and produces organic and non-genetically modified (non-GMO) ingredients for food industry worldwide. The CA$1.3b market-cap company posted a loss in its most recent financial year of US$8.8m and a latest trailing-twelve-month loss of US$11m leading to an even wider gap between loss and breakeven. As path to profitability is the topic on SunOpta'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.
SunOpta is bordering on breakeven, according to the 3 Canadian Food analysts. They anticipate the company to incur a final loss in 2022, before generating positive profits of US$23m in 2023. The company is therefore projected to breakeven around 2 years 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 52%, which is extremely buoyant. 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 SunOpta given that this is a high-level summary, however, keep in mind that typically a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.
Before we wrap up, there’s one issue worth mentioning. SunOpta currently has a debt-to-equity ratio of 172%. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, which in this case, the company has significantly overshot. A higher level of debt requires more stringent capital management which increases the risk around investing in the loss-making company.
This article is not intended to be a comprehensive analysis on SunOpta, so if you are interested in understanding the company at a deeper level, take a look at SunOpta's company page on Simply Wall St. We've also put together a list of relevant factors you should look at:
Historical Track Record: What has SunOpta's performance been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on SunOpta's board and the CEO’s background.
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.
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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