December Insights Into Basic Materials Stocks: Golden Saint Resources Ltd (LON:GSR)
Golden Saint Resources Ltd (AIM:GSR), a GBP£2.11M 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 23.18% in the upcoming year , and a robust short-term growth of 25.63% over the next couple of years. This rate is larger than the growth rate of the UK stock market as a whole. In this article, I’ll take you through the sector growth expectations, as well as evaluate whether Golden Saint Resources is lagging or leading in the industry. Check out our latest analysis for Golden Saint Resources
What’s the catalyst for Golden Saint Resources’s sector growth?
As a whole, 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 natural trend. There are plenty of emerging trends to deal with across the board including the reduction of waste, raw material inflation, and innovation in global supply chain management. Over the past year, the industry saw growth in the thirties, beating the UK market growth of 11.51%. Golden Saint 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 Golden Saint Resources may be trading cheaper than its peers.
Is Golden Saint Resources and the sector relatively cheap?
Metals and mining companies are typically trading at a PE of 13x, relatively similar to the rest of the UK stock market PE of 18x. This illustrates a fairly valued sector relative to the rest of the market, indicating low mispricing opportunities. However, the industry returned a lower 9.77% compared to the market’s 12.78%, potentially indicative of past headwinds. Since Golden Saint Resources’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge Golden Saint 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? Golden Saint Resources 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 Golden Saint Resources as part of your portfolio. However, if you’re relatively concentrated in metals and mining, you may want to value Golden Saint Resources based on its cash flows to determine if it is overpriced based on its current growth outlook.
Are you a potential investor? If Golden Saint Resources 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 Golden Saint Resources’s cash flows and assess whether the stock is trading at a fair price.
For a deeper dive into Golden Saint 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.
