Have Investors Already Priced In Basic Materials Growth For Lodestar Minerals Limited (ASX:LSR)?
Lodestar Minerals Limited (ASX:LSR), a AU$17.17M small-cap, operates in the basic materials industry which is sensitive to changes in the business cycle, as it supplies materials for construction activities. Basic material analysts are forecasting for the entire industry, an extremely robust growth of 31.87% in the upcoming year , and a whopping growth of 45.31% 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 Lodestar Minerals is lagging or leading in the industry. View our latest analysis for Lodestar Minerals
What’s the catalyst for Lodestar Minerals’s sector growth?
As a whole, the basic materials sector seems to be predominantly mature in terms of its industry life cycle. Companies appear to be vastly competitive and consolidation seems to be a common theme. 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 of 7.36%, beating the Australian market growth of 6.90%. Lodestar Minerals 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 Lodestar Minerals may be trading cheaper than its peers.
Is Lodestar Minerals and the sector relatively cheap?
The metals and mining industry is trading at a PE ratio of 14.43x, in-line with the Australian stock market PE of 17.22x. This illustrates a fairly valued sector relative to the rest of the market, indicating low mispricing opportunities. Furthermore, the industry returned a similar 10.35% on equities compared to the market’s 11.85%. Since Lodestar Minerals’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge Lodestar Minerals’s value is to assume the stock should be relatively in-line with its industry.
Next Steps:
Lodestar Minerals recently delivered an industry-beating growth rate in earnings, which is a positive for shareholders. If the stock has been on your watchlist for a while, now may be the time to buy, if you like its ability to deliver growth and are not highly concentrated in the materials industry. However, before you make a decision on the stock, I suggest you look at Lodestar Minerals’s fundamentals in order to build a holistic investment thesis.
1. Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
2. Historical Track Record: What has LSR’s performance been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Lodestar Minerals? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
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.
