Hecla Mining Co (HL): A Diamond in the Rough? An In-Depth Valuation Analysis
Hecla Mining Co (NYSE:HL) recently reported a daily gain of 6.13%, despite a 3-month loss of -18.04%. The company also noted a Loss Per Share of 0.08. This raises the question: is the stock modestly undervalued? Our valuation analysis aims to answer this question. We invite you to read on for a comprehensive exploration of Hecla Mining Co's intrinsic value.
Company Overview: Hecla Mining Co (NYSE:HL)
Hecla Mining Co is a producer and explorer of silver, gold, lead, and zinc. The company operates through various business segments, including Greens Creek, Lucky Friday, Keno Hill, Casa Berardi, and Nevada Operations. It generates maximum revenue from the Greens Creek segment, with a majority of its revenue derived from Canada.
At present, Hecla Mining Co's stock price stands at $4.33 per share, with a market cap of $2.70 billion. When compared to the GF Value of $5.09, it appears that the stock may be modestly undervalued. This comparison sets the stage for a deeper dive into the company's intrinsic value, combining financial assessment with essential company details.
Understanding the GF Value
The GF Value is a proprietary estimation of a stock's intrinsic value, calculated based on three factors:
Historical trading multiples such as PE Ratio, PS Ratio, PB Ratio, and Price-to-Free-Cash-Flow.
GuruFocus adjustment factor based on the company's past returns and growth.
Future estimates of business performance.
The GF Value Line on our summary page provides an overview of the fair value at which the stock should ideally be traded. If the stock price is significantly above the GF Value Line, it is overvalued, and its future return is likely to be poor. Conversely, if it is significantly below the GF Value Line, its future return will likely be higher.
Based on this analysis, Hecla Mining Co (NYSE:HL) appears to be modestly undervalued. This suggests that the long-term return of its stock is likely to be higher than its business growth.
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Financial Strength Analysis
Investing in companies with poor financial strength carries a higher risk of permanent capital loss. Therefore, it's crucial to review a company's financial strength before deciding to buy its stock. A good starting point is the cash-to-debt ratio. Hecla Mining Co has a cash-to-debt ratio of 0.19, which is worse than 87.45% of 2597 companies in the Metals & Mining industry. GuruFocus ranks Hecla Mining Co's overall financial strength at 5 out of 10, indicating fair financial strength.
Profitability and Growth Assessment
Investing in profitable companies carries less risk, especially those that have demonstrated consistent profitability over the long term. Companies with high profit margins typically offer better performance potential than those with low profit margins. Hecla Mining Co has been profitable 3 years over the past 10 years. The company had revenues of $718.30 million and a Loss Per Share of $0.08 in the past 12 months. Its operating margin of 5.26% is better than 60.38% of 848 companies in the Metals & Mining industry. Overall, GuruFocus ranks Hecla Mining Co's profitability as poor.
Growth is one of the most important factors in a company's valuation. If a company's business is growing, it usually creates value for its shareholders, especially if the growth is profitable. Conversely, if a company's revenue and earnings are declining, the company's value will decrease. Hecla Mining Co's 3-year average revenue growth rate is worse than 76.73% of 606 companies in the Metals & Mining industry. Its 3-year average EBITDA growth rate is -1.4%, ranking worse than 63.11% of 1857 companies in the Metals & Mining industry.
ROIC vs WACC
Comparing a company's return on invested capital (ROIC) to its weighted average cost of capital (WACC) can also evaluate its profitability. ROIC measures how well a company generates cash flow relative to the capital it has invested in its business. The WACC is the rate that a company is expected to pay on average to all its security holders to finance its assets. If the ROIC exceeds the WACC, the company is likely creating value for its shareholders. Over the past 12 months, Hecla Mining Co's ROIC was 1.29 while its WACC came in at 11.9.
Conclusion
In conclusion, the stock of Hecla Mining Co (NYSE:HL) shows every sign of being modestly undervalued. The company's financial condition is fair, and its profitability is poor. Its growth ranks worse than 63.11% of 1857 companies in the Metals & Mining industry. To learn more about Hecla Mining Co stock, you can check out its 30-Year Financials here.
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This article first appeared on GuruFocus.
