Full Metal Minerals Ltd (TSXV:FMM), a CADCA$593.09K small-cap, operates in the basic materials industry which can be affected by shifts in the housing market, as many produced raw materials are components of construction projects. Basic material analysts are forecasting for the entire industry, a positive double-digit growth of 11.63% in the upcoming year , and an overall negative growth rate in the next couple of years. Unsuprisingly, this is below the growth rate of the Canadian stock market as a whole. Below, I will examine the sector growth prospects, and also determine whether Full Metal Minerals is a laggard or leader relative to its basic materials sector peers. View our latest analysis for Full Metal Minerals
What’s the catalyst for Full Metal Minerals’s sector growth?
TSXV:FMM PE PEG Gauge Jan 18th 18
The metals and mining sector’s PE is currently hovering around 12x, below the broader Canadian stock market PE of 17x. This means the industry, on average, is relatively undervalued compared to the wider market – a potential mispricing opportunity here! Though, the industry did returned a lower 7.18% compared to the market’s 9.24%, which may explain the lower relative valuation. Since Full Metal Minerals’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge Full Metal Minerals’s value is to assume the stock should be relatively in-line with its industry.
What this means for you:
Are you a shareholder? Full Metal Minerals has been a metals and mining industry laggard in the past year. If your initial investment thesis is around the growth prospects of Full Metal Minerals, there are other metals and mining companies that have delivered higher growth, and perhaps trading at a discount to the industry average. Consider how Full Metal Minerals fits into your wider portfolio and the opportunity cost of holding onto the stock.
Are you a potential investor? If Full Metal Minerals has been on your watchlist for a while, now may be a good time to dig deeper into the stock. Although its growth has delivered lower growth relative to 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 Full Metal Minerals’s future cash flows in order to assess whether the stock is trading at a reasonable price.
For a deeper dive into Full Metal Minerals’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.