Unveiling Hecla Mining Co (HL)'s Value: Is It Really Priced Right? A Comprehensive Guide
Despite a daily loss of 7.42% and a 3-month loss of 29.51%, Hecla Mining Co (NYSE:HL) presents a compelling case for value investors. The company's Loss Per Share stands at 0.08, suggesting a challenging financial period. However, is the stock modestly undervalued as our analysis suggests? This comprehensive analysis aims to answer this question and provide insights into the company's valuation.
Introduction to Hecla Mining Co
Hecla Mining Co is a leading producer and explorer of silver, gold, lead, and zinc. The company operates through several business segments, including Greens Creek, Lucky Friday, Keno Hill, Casa Berardi, and Nevada Operations. A majority of its revenue is derived from Canada. With a current stock price of $3.62, the company's market cap stands at $2.20 billion, presenting an interesting comparison with its GF Value of $4.94.
Understanding the GF Value
The GF Value is a unique measure of a stock's intrinsic value, calculated based on historical multiples, a GuruFocus adjustment factor, and future business performance estimates. The GF Value Line provides an overview of the stock's fair trading value. 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.
Hecla Mining Co's stock appears to be modestly undervalued based on the GF Value calculation. Given this undervaluation, the long-term return of its stock is likely to exceed its business growth.
Assessing Hecla Mining Co's Financial Strength
Investing in companies with low financial strength could result in permanent capital loss. Therefore, it's crucial to review a company's financial strength before buying shares. Hecla Mining Co has a cash-to-debt ratio of 0.19, which ranks worse than 87.4% of 2628 companies in the Metals & Mining industry. Based on this, GuruFocus ranks Hecla Mining Co's financial strength as 5 out of 10, suggesting a fair balance sheet.
Profitability and Growth of Hecla Mining Co
Investing in profitable companies carries less risk, especially those with consistent profitability over the long term. Hecla Mining Co has been profitable 3 years over the past 10 years. During the past 12 months, the company had revenues of $718.30 million and a Loss Per Share of $0.08. Its operating margin of 5.26% is better than 60.82% of 855 companies in the Metals & Mining industry. However, GuruFocus ranks Hecla Mining Co's profitability as poor.
Growth is a crucial factor in a company's valuation. The faster a company is growing, the more likely it is to be creating value for shareholders, especially if the growth is profitable. Hecla Mining Co's 3-year average annual revenue growth rate is -2.1%, which ranks worse than 77.3% of 599 companies in the Metals & Mining industry. The 3-year average EBITDA growth rate is -1.4%, ranking worse than 62.84% of 1846 companies in the Metals & Mining industry.
ROIC vs WACC
Comparing a company's return on invested capital (ROIC) and the weighted average cost of capital (WACC) provides another perspective on profitability. ROIC measures how well a company generates cash flow relative to the capital it has invested in its business. WACC is the rate that a company is expected to pay on average to all its security holders to finance its assets. Ideally, the ROIC should be higher than the WACC. For the past 12 months, Hecla Mining Co's ROIC is 1.29, and its WACC is 12.12.
Conclusion
In conclusion, Hecla Mining Co (NYSE:HL) appears to be modestly undervalued. While the company's financial condition is fair, its profitability is poor, and its growth ranks worse than 62.84% of 1846 companies in the Metals & Mining industry. For more information about Hecla Mining Co, you can check out its 30-Year Financials here.
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This article first appeared on GuruFocus.
