Should You Buy Labrador Iron Ore Royalty Corporation (TSX:LIF) At $21.38?
Labrador Iron Ore Royalty Corporation (TSX:LIF), a metals and mining company based in Canada, saw a double-digit share price rise of over 10% in the past couple of months on the TSX. With many analysts covering the stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, what if the stock is still a bargain? Let’s take a look at LIF’s outlook and value based on the most recent financial data to see if the opportunity still exists. Check out our latest analysis for Labrador Iron Ore Royalty
Is LIF still cheap?
According to my relative valuation model, LIF seems to be currently fairly priced. In this instance, I’ve used the price-to-equity (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that LIF’s ratio of 8.7x is trading slightly below its industry peers’ ratio of 11.1x, which means if you buy LIF today, you’d be paying a fair price for it. And if you believe LIF should be trading in this range, then there isn’t much room for the share price grow beyond what it’s currently trading. Although, there may be an opportunity to buy in the future. This is because LIF’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, LIF’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.
What does the future of LIF look like?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at LIF future expectations. Though in the case of LIF, it is expected to deliver a highly negative earnings growth in the next few years, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.
What this means for you:
Are you a shareholder? LIF seems fairly priced right now, but given the uncertainty from negative returns in the future, this could be the right time to de-risk your portfolio. Is your current exposure to the stock beneficial for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on LIF, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping tabs on LIF for a while, now may not be the most advantageous time to buy, given it is trading around its fair value. The price seems to be trading at fair value, which means there’s less benefit from mispricing. In addition to this, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help crystalize your views on LIF should the price fluctuate below its true value.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Labrador Iron Ore Royalty. You can find everything you need to know about LIF in the latest infographic research report. If you are no longer interested in Labrador Iron Ore Royalty, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
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.
