The Motley Fool

Cobalt 27 Capital Corp. (TSXV:KBLT) Is a Potentially Explosive Electric Car Stock

At $8.12 a share at the time of writing, Cobalt 27 Capital Corp. (TSXV:KBLT) is currently overvalued by almost eight times its future cash flow value. However, shares fell by 5.58% over the last 24 hours, plus a low P/E marks an opportunity for investors looking beyond future cash flow as an indicator of value.

A pure-play cobalt stock that offers long-term growth investors exposure to the electric vehicle and battery markets, Cobalt 27 is a moderate to strong buy. Let’s look at some of its fundamentals and weigh them up against broader market implications.

The pure-play cobalt miner you didn’t know you needed

Its multiples show that Cobalt 27 is in fact good value for money right now. If we look at its P/E of 6.8 times earnings, we can see that this cobalt miner beats both the mining industry average and the TSX.

While its PEG is somewhat opaque, we can see that Cobalt 27’s P/B indicates that it is currently trading at its book price. Though it is currently receiving an estimated forecast of -103.9% expected annual growth in earnings, this is liable to change as global markets shift and tech surges. Factor in the stock’s meteoric surge in the past year, and you could have some indication of how much upside a pure-play cobalt stock might accumulate.

Growth investors should decide whether to look elsewhere or to make their own calculations based on the market rather than rely on other analysts’ estimates. After all, it’s better to be roughly right than precisely wrong.

Though Cobalt 27 does not currently pay a dividend, investors looking to buy and hold for a long-term breakthrough should note that this company holds zero debt and has a low level of unsold assets. This reduces risk and should be taken into consideration by potential commodities investors when making comparisons with competing cobalt stocks on the TSX.

An undervalued commodities superstar in the making

If you want to profit from the booming global tech market, but don’t want to play individual product or service stocks, buying up cobalt shares is a great way to do it. You’ll find that many precious mineral and metal commodities tend to have healthy balance sheets and good growth forecasts, and cobalt isn’t any different with its lack of debt and strong positioning for an EV market bull rush.

Looking at Cobalt 27, we can see that the stock price follows the commodity’s volatility quite closely. Look at that five-year beta of 1.65, and then compare it to the Canadian commodities market at 2.14 for the same period. While that may seem fairly high, bear in mind that Cobalt 27’s share price is almost identical to what it was this time last year after it spiked on news of a managerial shake-up and roster of new acquisitions.

The bottom line

Demand for electric vehicles is going to rocket in years to come. If you’re looking for a counter investment to your rich oil stocks, consider cobalt as an alternative source of capital gains. As Cobalt 27’s share price dips, commodities investors might be wise to take advantage of the value opportunity this presents. Look again at that low P/E and correlation to book price, and you’ll see a commodity stock that belongs firmly in any Canadian investor’s precious minerals portfolio.

Just Released! 5 Stocks Under $49 (FREE REPORT)

Motley Fool Canada's market-beating team has just released a brand-new FREE report revealing 5 "dirt cheap" stocks that you can buy today for under $49 a share.
Our team thinks these 5 stocks are critically undervalued, but more importantly, could potentially make Canadian investors who act quickly a fortune.
Don't miss out! Simply click the link below to grab your free copy and discover all 5 of these stocks now.

Claim your FREE 5-stock report now!

Fool contributor Victoria Hetherington has no position in any of the stocks mentioned. 

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss an important event.

Iain Butler and the Stock Advisor Canada team only publish their new “buy alerts” twice a month, and only to an exclusively small group.

This is your chance to get in early on what could prove to be very special investment advice.

Enter your email address below to get started now, and join the other thousands of Canadians who have already signed up for their chance to get the market-beating advice from Stock Advisor Canada.

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.