About Mining Stocks @ The Fool

4 Mining Stocks Trading At Bargain Prices: Centamin PLC, Anglo American plc, Antofagasta plc And Lonmin Plc

Photo: Roy Luck. Cropped. Licence: https://creativecommons.org/licenses/by/2.0/deed.en

By Peter Stephens - Tuesday, 14 April, 2015

2015 has been a disappointing year for the mining sector, with the majority of its incumbents underperforming the FTSE 100 since the turn of the year. For example, Lonmin(LSE: LMI) and Anglo American (LSE: AAL) (NASDAQOTH: AAUKY.US) are heavily in the red this year, having fallen by 27% and 15% respectively, while Antofagasta (LSE ANTO) andCentamin (LSE: CEY) are well behind the FTSE 100’s 7% gain, with their share prices falling by 3% and rising by 2% respectively.

However, this could be the perfect time to buy them, with all four companies trading at very appealing share prices.

Growth Potential

While 2015 is expected to be a mixed bag for the four companies, next year is forecast to be much brighter. Certainly, commodity prices may fail to stabilise or improve, but efficiencies and rationalisation are set to have a considerable impact on the wider sector, thereby causing its outlook for 2016 to be relatively strong.

For example, Centamin is expected to see its bottom line rise by 28% next year, which is roughly four times the growth rate of the FTSE 100. Certainly, its forecasts may change somewhat between now and then, but its current valuation appears to provide investors in the stock with a very wide margin of safety. This is evidenced by its price to earnings (P/E) ratio of just 11.1, which when combined with its growth potential equates to a price to earnings growth (PEG) ratio of just 0.3. As such, Centamin’s share price could move much higher.

It’s a similar story with the likes of Antofagasta, Anglo American and Lonmin. Their bottom lines are set to rise by 29%, 35% and 380% respectively between 2015 and 2016. This puts them on PEG ratios of just 0.5, 0.3 and 0.2 respectively, all of which indicate that considerable capital gains are on offer and, perhaps more importantly, that disappointment on the earnings front is being priced in. In other words, wide margins of safety are on offer right now.

Risks

Clearly, all four companies are at risk from price weakness in their chosen commodity markets. This could cause write downs to their asset base, which would clearly impact heavily on their bottom lines and valuations moving forward. However, the outlook for the commodity markets is significantly better than has been its performance in recent years, with an improving global economy and the potential for Chinese stimulus likely to mean that pricing is more appealing in future.

And, even if commodity prices do weaken, the likes of Centamin, Antofagasta, Anglo American and Lonmin trade on such appealing valuations that, for long term investors, it makes sense to buy them now due to their very favourable risk/reward profiles.

Of course, they aren't the only companies that could boost your portfolio returns. However, finding the best stocks at the lowest prices can be challenging when work and other commitments get in the way.

Next ...

By Peter Stephens - Wednesday, 8 April, 2015

The last year has been incredibly difficult for the mining sector, with commodity price falls hurting the bottom lines of most of its incumbents. And, almost inevitably, the share prices of most mining stocks have fallen dramatically, with Rio Tinto (LSE: RIO) (NYSE: RIO.US), for instance, seeing its share price fall by 14% since April last year.

However, the tide could be turning for the sector, as evidenced by a recent surge in investor sentiment for Rio Tinto and, perhaps more acutely, for Centamin (LSE: CEY), which has seen its share price rise by 14% in the last few weeks alone. And, looking ahead, there could be more capital gains to come for both companies.

A Return To Growth

Of course, for Rio Tinto and Centamin, things are set to get worse before they get better. In Rio Tinto’s case, its bottom line is expected to fall by 36% this year as a 10-year low for iron ore continues to impact on its bottom line. However, the efficiency programmes being undertaken by the company, as well as increased production, mean that its earnings are set to rise by 22% next year. This puts Rio Tinto on a price to earnings growth (PEG) ratio of just 0.4, which indicates that its share price could move significantly higher.

Meanwhile, it’s a similar story for Centamin. Its net profit is due to drop by 37% this year, followed by a rise of 29% next year. Clearly, investors have started to look at its medium-term future, but even though its shares have risen strongly recently, Centamin still trades on a PEG ratio of just 0.3. This shows that there could be further gains ahead, with the company offering a very wide margin of safety at the present time.

Income Potential

In addition to their growth prospects, Rio Tinto and Centamin also offer excellent income prospects. As well as yielding 5.3% and 2.6% respectively at the present time, Rio Tinto and Centamin both have scope to increase dividends per share at a rapid rate. That’s because both companies have relatively modest payout ratios, which when combined with their stunning growth prospects means that their dividend yields could move much, much higher. For example, Rio Tinto has a payout ratio of 62%, while Centamin’s is even lower at 27%, thereby making them companies with significant dividend growth potential.

Looking Ahead

So, while recent months have been very challenging for investors in mining stocks, the future appears to be much brighter. And, with their combination of income, growth and value appeal, Rio Tinto and Centamin appear to be two stocks that are well worth buying at the present time.

Of course, finding stocks from any sector that are worth adding to your portfolio is a tough task, which is why the analysts at The Motley Fool have written a free and without obligation guide called 10 Steps To Making A Million In The Market.

It's a simple and straightforward guide that could make a real difference to your portfolio returns. As such, 2015 could prove to be an even better year than you had thought possible.

Next ...