MENU

Fool Canada’s first 1,000%+ winner?

Our Chief Investment Advisor, Iain Butler, and a team of The Motley Fool’s most talented investors from across the globe recently embarked on an unprecedented mission:

To identify the 20 Canadian small-cap companies they believe have the best shot at earning investors like you gains of 1,000%+ over the coming years.

For the next few days only, you can get the names and full details on these 20 potential “10-baggers” when you join Iain and his team in a first-of-its-kind project they have dubbed Discovery Canada 2017.

Teck Resources Ltd.: A Great Story to Avoid

With earnings for the first quarter of 2017 already released, investors now have a clearer picture of just what is happening with Canadian mining giant Teck Resources Ltd. (TSX:TECK.B)(NYSE:TECK.B).

The mining company reported earnings per share of $1.15 on a diluted basis with revenues totaling $2,894 million. The same quarter one year ago saw the company make profit of only $0.14 per share with revenues of $1,698 million. Clearly, things have improved from one year to the next.

After the past two years, shareholders are finally reaching a point of normalcy; shares are now finding a trading range. Over the past two years, shares fluctuated from under $5 to over $35 as the miner experienced a significant amount of volatility based on the fluctuations of the price of coal.

The good news is, the new president is pro-business, and that could be good for Teck.

The valuation

With shares currently trading near $28.50, shareholders are pretty much getting what they pay for. As of March 31, 2017, we can calculate the tangible book value per share to be approximately $29.31 per share. While this may seem attractive to some, let’s not forget what kind of business we’re looking at.

With almost any mining company, the quantity of any given resource to be mined is typically well known, along with the selling price. Revenues, profits, and the new tangible book value can be forecasted well in advance. Let’s not forget that when the resource is sold, the tangible book value per share will decline to reflect the sale.

The way investors make money from a mine is if the underlying price increases. If this is the case, then what comes out of the mine can be sold for a higher price, and a higher profit will be obtained.

Another way to increase the share price

Another opportunity at the disposal of company management is to take the available free cash and buy back shares. During the first quarter of the year, no shares were bought back. Instead, company management chose to repay debt in the amount of $1.5 billion.

For those who are wondering, the company pays a semi-annual dividend which totaled $0.10 per share for 2016. Teck Resources is purchased by investors for capital appreciation, and not for the dividend yield.

While shares of Teck Resources are by no means overvalued, the reality is that at this time, buyers will need to see either an increase in the share buyback or an increase in the price of the underlying resource produced by the company to justify a higher share price. Investors are getting no more than what they pay for.

1 Massive Dividend Stock to Buy Today (7.8% Yield!) - The Dividend Giveaway

The Motley Fool Canada's top dividend expert and lead adviser of Dividend Investor Canada, Bryan White, recently released a premium "buy report" on a dividend giant he thinks everyone should own. Not only that - but he's created a must-have, exclusive report that outlines all the alarming traits of dividend stocks that are about to blow up - and how you can avoid them.

For this limited time only, we're not only taking 57% off Dividend Investor Canada, but we're offering you special access to two brand-new reports, free of charge upon signing up. They will outline everything you need to know so you steer clear of dividend burn-outs AND take advantage of the dividend giants in the Canadian market.

While this offer is still available, you can find out how to get a copy of these brand-new reports by simply clicking here.

Fool contributor Ryan Goldsman has no position in any stocks mentioned.

NEW! This Stock Could Be Like Buying Amazon In 1997

For only the 5th time in over 14 years, Motley Fool co-founder David Gardner just issued a Buy Recommendation on this recent Canadian IPO.

Stock Advisor Canada’s Chief Investment Adviser, Iain Butler, also recommended this company back in March – and it’s already up a whopping 57%!

Enter your email address below to find out how you can claim your copy of this brand new report, “Breakthrough IPO Receives Rare Endorsement.”

I consent to receiving information from The Motley Fool via email, direct mail, and occasional special offer phone calls. I understand I can unsubscribe from these updates at any time. Please read the Privacy Statement and Terms of Service for more information.