It’s time to buy stocks in the commodity sector. Most of the stocks in this sector are very undervalued and should rebound soon. Interest rates hikes and a rising Canadian dollar tend to boost commodity prices.
Goldcorp Inc. (TSX:G)(NYSE:GG) is a good stock to buy in the gold sector, and Lundin Mining Corp. (TSX: LUN) is an interesting choice in the mining sector. Both stocks are really cheap right now. Let’s take a closer look at those two companies.
Goldcorp Inc.
The world’s fourth-largest gold mining company has been affected by the depressed price of gold. Its share price has fallen by 17% over five years. It is trading just slightly above its 52-week low of $15.56. The stock is cheap right now with a low forward PEG of 0.70.
Goldcorp’s share price is down by more than 12% since the beginning of the year. The gold price begins to rebound as safe-haven demand returns, so Goldcorp’s share price should rise, too.
Goldcorp reported better-than-expected results in its second quarter, helped by lower costs. The Canadian gold producer reported net earnings of US$135 million, or US$0.16 per share. A year ago, the company reported a loss of US$78 million, or US$0.09 per share.
Adjusted earnings came at US$0.12 per share, beating analysts’ estimate of US$0.09 per share.
The Vancouver-based company produced 635,000 ounces of gold in the second quarter at a cost of US$800 an ounce. This is a production 4% larger than the 613,000 ounces of gold it produced at a cost of US$1,067 per ounce in the second quarter of 2016.
Goldcorp pays a quarterly dividend of US$0.02 per share for a yield of 0.61%.
Goldcorp currently has a return on equity of 3.48% and a net profit margin of 13.22%. A strong growth rate of 51.36% is expected for the next five years.
Lundin Mining Corp.
Lundin Mining is a diversified base metals company primarily producing copper, nickel, and zinc. More than 60% of its revenue comes from copper. Copper price is rising, which is beneficial to Lundin Mining.
The mining company’s stock returned almost 12% over the last five years and is up 39% year to date. It is trading just slightly below its 52-week high of $9.90. The share price is very cheap right now, with a very low forward PEG of 0.55.
Lundin Mining reported EPS of $0.09 for its second quarter, topping the consensus estimate of $0.06 by $0.03. The company had revenue of $611.6 million during the quarter. Analysts expect that Lundin Mining will post $0.35 earnings per share for the current year.
Lundin Mining has the best balance sheet among its peers, with a cash balance of approximately US$2.1 billion and net cash of US$1.1 billion.
A strong balance sheet gives Lundin the flexibility to acquire assets or pay a dividend. A lot of internal funds gives downside protection in a low commodity price environment or early debt retirement.
The mining company recently disclosed a quarterly dividend of $0.03 per share, which was paid on September 20. This represents a $0.12 annualized dividend for a dividend yield of 1.37%. Lundin Mining started paying a dividend to its shareholders on April 18, 2017.
Lundin Mining has a return on equity of 9.8% and a net margin of 17.63%. A strong growth rate of 43.80% is expected for the next five years.
