Is Boss Resources Limited (ASX:BOE) An Industry Laggard Or Leader?
Boss Resources Limited (ASX:BOE), a AUDA$58.98M small-cap, is a metals and mining operating in an industry which supplies materials for construction. This means it is highly sensitive to changes in the economic cycle, a key driver of building activities. Basic material analysts are forecasting for the entire industry, a strong double-digit growth of 29.79% in the upcoming year , and a massive growth of 36.64% over the next couple of years. This rate is larger than the growth rate of the Australian stock market as a whole. Below, I will examine the sector growth prospects, as well as evaluate whether Boss Resources is lagging or leading in the industry. View our latest analysis for Boss Resources
What’s the catalyst for Boss Resources’s sector growth?
Overall, the basic materials sector seems like it has reached maturity in its life cycle. Companies appear to be vastly competitive and consolidation seems to be a common theme. However, the industry is still facing many emerging trends including the reduction of waste, raw material inflation, and innovation in global supply chain management. Over the past year, the industry saw growth of 6.76%, though still underperforming the wider Australian stock market. Boss Resources lags the pack with its sustained negative earnings over the past couple of years. The company’s outlook seems uncertain, with a lack of analyst coverage, which doesn’t boost our confidence in the stock. This lack of growth and transparency means Boss Resources may be trading cheaper than its peers.
Is Boss Resources and the sector relatively cheap?
Metals and mining companies are typically trading at a PE of 15x, relatively similar to the rest of the Australian stock market PE of 18x. This illustrates a fairly valued sector relative to the rest of the market, indicating low mispricing opportunities. Furthermore, the industry returned a similar 10.53% on equities compared to the market’s 11.91%. Since Boss Resources’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge Boss Resources’s value is to assume the stock should be relatively in-line with its industry.
What this means for you:
Are you a shareholder? Boss Resources has been a metals and mining industry laggard in the past year. If your initial investment thesis is around the growth prospects of Boss Resources, there are other metals and mining companies that have delivered higher growth, and perhaps trading at a discount to the industry average. Consider how Boss Resources fits into your wider portfolio and the opportunity cost of holding onto the stock.
Are you a potential investor? If Boss Resources 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 Boss Resources’s future cash flows in order to assess whether the stock is trading at a reasonable price.
For a deeper dive into Boss 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.
