ASX:ARE PE PEG Gauge Nov 14th 17
The metals and mining industry is trading at a PE ratio of 14x, in-line with the Australian stock market PE of 17x. This means the industry, on average, is fairly valued compared to the wider market – minimal expected gains and losses from mispricing here. Furthermore, the industry returned a similar 11.83% on equities compared to the market’s 11.92%. Since ARE’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge ARE’s value is to assume the stock should be relatively in-line with its industry.
What this means for you:
Are you a shareholder? ARE recently delivered an industry-beating growth rate in earnings, which is a positive for shareholders. If you’re bullish on the stock and well-diversified by industry, you may decide to hold onto ARE as part of your portfolio. However, if you’re relatively concentrated in metals and mining, you may want to value ARE based on its cash flows to determine if it is overpriced based on its current growth outlook.
Are you a potential investor? If ARE has been on your watchlist for a while, now may be the time to enter into the stock, if you like its ability to deliver growth and are not highly concentrated in the metals and mining industry. Before you make a decision on the stock, take a look at ARE’s cash flows and assess whether the stock is trading at a fair price.
For a deeper dive into Argonaut Resources NL’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.