As an investor, I look for investments which does not compromise one fundamental factor for another. By this I mean, I look at stocks holistically, from their financial health to their future outlook. In the case of Lundin Mining Corporation (TSE:LUN), it is a financially-healthy company with a a excellent growth outlook, not yet reflected in the share price. In the following section, I expand a bit more on these key aspects. For those interested in understanding where the figures come from and want to see the analysis, read the full report on Lundin Mining here.
Flawless balance sheet and good value
One reason why investors are attracted to LUN is its earnings growth potential in the near future of 25%, made up of high-quality, operational cash from its core business, which is expected to increase by 64% next year. This indicates a high-quality bottom-line expansion, as opposed to those driven by unsustainable cost-cutting activities. LUN's shares are now trading at a price below its true value based on its discounted cash flows, indicating a relatively pessimistic market sentiment. According to my intrinsic value of the stock, which is driven by analyst consensus forecast of LUN's earnings, investors now have the opportunity to buy into the stock to reap capital gains. Compared to the rest of the metals and mining industry, LUN is also trading below its peers of similar sizes in terms of their assets. This supports the theory that LUN is potentially underpriced.
LUN's ability to maintain an adequate level of cash to meet upcoming liabilities is a good sign for its financial health. This implies that LUN manages its cash and cost levels well, which is an important determinant of the company’s health. LUN appears to have made good use of debt, producing operating cash levels of 43.34x total debt in the prior year. This is a strong indication that debt is reasonably met with cash generated.
For Lundin Mining, there are three fundamental factors you should further research:
- Historical Performance: What has LUN's returns 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.
- Dividend Income vs Capital Gains: Does LUN return gains to shareholders through reinvesting in itself and growing earnings, or redistribute a decent portion of earnings as dividends? Our historical dividend yield visualization quickly tells you what your can expect from LUN as an investment.
- Other Attractive Alternatives : Are there other well-rounded stocks you could be holding instead of LUN? Explore our interactive list of stocks with large potential to get an idea of what else is out there you may be missing!
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.