Advertisement
U.S. markets closed
  • S&P 500

    5,254.35
    +5.86 (+0.11%)
     
  • Dow 30

    39,807.40
    +47.29 (+0.12%)
     
  • Nasdaq

    16,379.46
    -20.06 (-0.12%)
     
  • Russell 2000

    2,124.55
    +10.20 (+0.48%)
     
  • Crude Oil

    83.11
    -0.06 (-0.07%)
     
  • Gold

    2,254.80
    +16.40 (+0.73%)
     
  • Silver

    25.10
    +0.18 (+0.74%)
     
  • EUR/USD

    1.0799
    +0.0006 (+0.05%)
     
  • 10-Yr Bond

    4.2060
    +0.0100 (+0.24%)
     
  • GBP/USD

    1.2641
    +0.0019 (+0.15%)
     
  • USD/JPY

    151.2350
    -0.1370 (-0.09%)
     
  • Bitcoin USD

    70,491.36
    -428.45 (-0.60%)
     
  • CMC Crypto 200

    885.54
    0.00 (0.00%)
     
  • FTSE 100

    7,952.62
    +20.64 (+0.26%)
     
  • Nikkei 225

    40,369.44
    +201.37 (+0.50%)
     

Nusantara Resources Limited (ASX:NUS): Is Basic Materials An Attractive Sector Play?

Nusantara Resources Limited (ASX:NUS), a AUDA$27.31M small-cap, operates in the basic materials industry which can be affected by shifts in the housing market, as many produced raw materials are components of construction projects. Basic material analysts are forecasting for the entire industry, an extremely robust growth of 32.94% in the upcoming year , and an enormous growth of 39.25% 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, and also determine whether Nusantara Resources is a laggard or leader relative to its basic materials sector peers. See our latest analysis for Nusantara Resources

What’s the catalyst for Nusantara Resources’s sector growth?

ASX:NUS Growth In Earnings Jan 4th 18
ASX:NUS Growth In Earnings Jan 4th 18

Overall, the basic materials sector seems to be predominantly mature in terms of its industry life cycle. Companies appear to be highly competitive and consolidation seems to be a natural trend. 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 7.36%, beating the Australian market growth of 6.89%. Given the lack of analyst consensus in Nusantara Resources’s outlook, we could potentially assume the stock’s growth rate broadly follows its metals and mining industry peers. This means it is an attractive growth stock relative to the wider Australian stock market.

Is Nusantara Resources and the sector relatively cheap?

The metals and mining sector’s PE is currently hovering around 15x, in-line with the Australian stock market PE of 18x. 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 11.87%. Since Nusantara Resources’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge Nusantara Resources’s value is to assume the stock should be relatively in-line with its industry.

What this means for you:

Are you a shareholder? Metals and mining stocks are currently expected to grow faster than the average stock on the index. This means if you’re overweight in this sector, your portfolio will be tilted towards high-growth. The industry is trading relatively in-line with the market, which means you may be paying a fair value for the materials stocks should you wish to accumulate more of your holdings.

Are you a potential investor? If you’ve been keeping an eye on the metals and mining sector, now is the right time to dive deeper into the stock-level. The high growth prospect makes stocks such as Nusantara Resources a more appealing investment case, though the industry is trading relatively in-line with the rest of the wider marker. I suggest you examine the stock’s fundamentals, such as its financial health, before you make an investment decision.

For a deeper dive into Nusantara Resources’s stock, take a look at the company’s latest free analysis report to find out more on its financial health and other fundamentals. Interested in other basic materials stocks instead? Use our free playform to see my list of over 2000 other basic materials companies trading on the market.


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.

Advertisement