ASX:VRC PE PEG Gauge Sep 25th 17
Metals and mining companies are typically trading at a PE of 19 times, in-line with the Australian stock market PE of 22 times. This means the industry, on average, is fairly valued compared to the wider market – minimal expected gains and losses from mispricing here. However, the industry returned a lower 12 percent compared to the market’s 16 percent, potentially indicative of past headwinds. Since VRC’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge VRC’s value is to assume the stock should be relatively in-line with its industry.
What this means for you:
Are you a shareholder? VRC is a metals and mining industry laggard in terms of its future growth outlook. If your initial investment thesis is around the growth prospects of VRC, there are other metals and mining companies that are expected to deliver higher growth in the future, and perhaps trading at a discount to the industry average. Consider how VRC fits into your wider portfolio and the opportunity cost of holding onto the stock.
Are you a potential investor? If VRC has been on your watchlist for a while, now may be a good time to dig deeper into the stock. Although its growth is expected to be lower than its metals and mining peers in the near term, the market may be pessimistic on the stock, leading to a potential undervaluation. Before you make a decision on the stock, I suggest you look at VRC’s future cash flows in order to assess whether the stock is trading at a reasonable price.
For a deeper dive into Volt Resources's stock, take a look at the company's latest free analysis report to find out more on its financial health and other fundamentals. Interested in other basic materials stocks instead? Use our free playform to see my list of over 2000 other basic materials companies trading on the market.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.