Is Goldquest Mining Corp (CVE:GQC) Undervalued?
Goldquest Mining Corp (TSXV:GQC), 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 TSXV. As a small cap stock, hardly covered by any analysts, there is generally more of an opportunity for mispricing as there is less activity to push the stock closer to fair value. Is there still an opportunity here to buy? Let’s examine Goldquest Mining’s valuation and outlook in more detail to determine if there’s still a bargain opportunity. Check out our latest analysis for Goldquest Mining
What is Goldquest Mining worth?
The stock seems fairly valued at the moment according to my relative valuation model. In this instance, I’ve used the price-to-book (PB) ratio given that there is not enough information to reliably forecast the stock’s cash flows, and its earnings doesn’t seem to reflect its true value. I find that Goldquest Mining’s ratio of 2.45x is trading slightly above its industry peers’ ratio of 1.72x, which means if you buy Goldquest Mining today, you’d be paying a relatively reasonable price for it. And if you believe Goldquest Mining should be trading in this range, then there isn’t really any 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 Goldquest Mining’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, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.
What kind of growth will Goldquest Mining generate?
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. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. With profit expected to grow by a double-digit 15.53% in the upcoming year, the short-term outlook is positive for Goldquest Mining. It looks like higher cash flows is on the cards for the stock, which should feed into a higher share valuation.
What this means for you:
Are you a shareholder? GQC’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at GQC? Will you have enough confidence to invest in the company should the price drop below its fair value?
Are you a potential investor? If you’ve been keeping tabs on GQC, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for GQC, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Goldquest Mining. You can find everything you need to know about Goldquest Mining in the latest infographic research report. If you are no longer interested in Goldquest Mining, 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.
