Top 3 Canadian Mining Stocks With Low P/E Ratios

Alacer Gold Corp. (TSX:ASR) and two other Canadian mining stocks are a buy right now based on their low P/E ratios and other attractive multiples.

| More on:
A miner down a mine shaft

Image source: Getty Images.

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn more

Mining stocks are hot property at the moment, with materials making up one-half of a global market-saving tag team alongside financials right now. If you’re looking to buy mining stocks in 2018, however, you want to be very sure that they have good value. As minerals and precious metals stocks tend not to pay dividends, your profits will be coming from future capital gains that will have survived potentially extreme market turbulence, so you’ll want your choices to be solid.

If you want to buy mining stocks, it makes sense to drill down into their multiples first. Generally speaking, you’ll want their P/E ratios to be fairly low. The TSX average is 16.8 times earnings, so anything around that zone is considered market-weight, while anything lower is usually an indicator of undervaluation. Let’s take a look now at three Canadian stocks that fit the bill.

Alacer Gold Corp. (TSX:ASR) has an 80% interest in the productive Çöpler Gold Mine in Turkey. It’s currently discounted by 35% compared to its future cash flow value. Looking at its P/E, we can see a nice low ratio of 5.7 times earnings. This is matched by a soothing PEG of 0.2 times growth and a very encouraging P/B of 0.8 times book. Throw in a 26% expected annual growth in earnings and you have a solid gold pure-play stock that’s ideal for mid- to long-term capital gains.

Ivanhoe Mines Ltd. (TSX:IVN) primarily mines African assets for zinc, copper, silver and germanium. Ivanhoe Mines is discounted by 38% right now compared to its future cash flow value. Its P/E of 9.3 times earnings is just what you want in a Canadian mining stock, while its PEG 0.5 times growth is another indicator of what good value Ivanhoe Mines is currently. Looking at its P/B of 0.2 times book, we can see that it’s well valued in terms of assets. With an expected 17% in annual growth of earnings, Ivanhoe Mines is also a moderate growth stock.

Trevali Mining Corp. (TSX:TV) is your go-to zinc miner that’s active in Peru and Canada. It’s a great pick if you’re looking for pure-play zinc. Trevali Mining has a 32% discount at the moment if you compare its share price against its future cash flow value. Again, this is a stock with a low P/E: 9.3 times earnings, to be precise. While its PEG cannot be calculated as there is currently no projected growth, Trevali Mining is changing hands for an encouraging P/B of 0.7 times book.

The bottom line

As you might expect from stocks with low P/Es, these are all good value picks: compare those P/Es with the metals and mining average of 11.1 times earnings. In addition, they’re all healthy stocks with acceptable levels of debt and unsold physical assets. Good discounts and low multiples make all three a buy if you’re looking for sustainable Canadian mining stocks. Alacer Gold comes out on top in terms of overall strength, with a solid growth forecast, low P/E and other fundamentals, and +30% share price discount.

Beaten-up mining stocks are a good place to look for long-term capital gains, so shop around. As with any mining play, however, make sure that supply and demand issues aren’t causing a distracting devaluation while eroding any upside. If this is the case, you could be looking at a value trap rather than a value opportunity. While the three stocks mentioned here should be safe, stay sharp and do your homework.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

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

More on Stocks for Beginners

financial freedom sign
Stocks for Beginners

5 Investing Hacks to Build a Million-Dollar Portfolio  

Its not difficult to build a million-dollar portfolio. Here are five simple investing hacks that take less than 10 minutes…

Read more »

Volatile market, stock volatility
Stocks for Beginners

3 Top TSX Stocks to Buy in Volatile Markets

Sitting on cash? Consider these three TSX stocks for the long term.

Read more »

potted green plant grows up in arrow shape
Stocks for Beginners

1 Canadian Growth Stock That Could Double Your Money in an Economic Recovery

The market downturn is an opportunity to lock growth during the economic recovery. This stock is a blend of value,…

Read more »

edit Safe pig, protect money
Stocks for Beginners

2 Safe TSX Stocks for Beginners to Buy in a Market Correction

These two TSX stocks are still solid long-term buys today, despite the recent market correction.

Read more »

Human Hand Placing A Coin On Increasing Coin Stacks In Front Of House
Stocks for Beginners

3 Real Estate Stocks to Buy for Terrified Investors

Motley Fool investors shouldn't be afraid of investing in real estate if they have a long-term growth strategy, but these…

Read more »

Value for money
Stocks for Beginners

Market Correction: A New List of Value Stocks Just for You

The 2022 stock market has been bearish, with tech stocks being the biggest losers. But tables are turning. It's time…

Read more »

Knowledge concept with quote written on wooden blocks
Stocks for Beginners

3 Reasons Why Inflation Impacts Canadian Stocks

Here are the three most common ways inflation impacts Canadian stocks, why they're selling off, and when you'll want to…

Read more »

Growth from coins
Stocks for Beginners

2 Growth Stocks New Investors Can Buy on the Dip Today

After the recent market correction, many growth stocks look cheap, making it a perfect time for stock market beginners to…

Read more »