Sabre Resources Limited (ASX:SBR), a AU$4.53M small-cap, is a metals and mining operating in an industry which supplies materials for construction. This means it is highly sensitive to changes in the economic cycle, a key driver of building activities. Basic material analysts are forecasting for the entire industry, a positive double-digit growth of 26.04% in the upcoming year , and an enormous growth of 40.71% 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 Sabre Resources is lagging or leading in the industry. Check out our latest analysis for Sabre Resources
What’s the catalyst for Sabre Resources’s sector growth?
Overall, 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 inevitable. However, the industry is still facing many emerging trends including the reduction of waste, raw material inflation, and innovation in global supply chain management. Over the past year, the industry saw growth of 7.95%, beating the Australian market growth of 7.02%. Sabre 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 Sabre Resources may be trading cheaper than its peers.
Is Sabre Resources and the sector relatively cheap?
The metals and mining industry is trading at a PE ratio of 14.28x, in-line with the Australian stock market PE of 17.14x. This illustrates a fairly valued sector relative to the rest of the market, indicating low mispricing opportunities. Furthermore, the industry returned a similar 10.72% on equities compared to the market’s 11.85%. Since Sabre Resources’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge Sabre Resources’s value is to assume the stock should be relatively in-line with its industry.
Sabre Resources has been a metals and mining industry laggard in the past year. If Sabre Resources has been on your watchlist for a while, now may be a good time to dig deeper into the stock. Although it delivered lower growth relative to its materials peers in the near term, the market may be pessimistic on the stock, leading to a potential undervaluation. However, before you make a decision on the stock, I suggest you look at Sabre Resources’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 SBR’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 Sabre Resources? 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.