It’s easy to think that metals and mining stocks are all alike at first glance. However, this is not the case, with a wide range of multiple mixes, dividend yields (or, more commonly, the lack of), and outlook making for an uneven playing field. The four TSX index stocks detailed below therefore offer four subtly different plays in the metals and mining space.
Investors looking for a solid gold stock on the TSX index should start with the likes of Goldcorp. Up 1.88% in the last five days, it’s a popular choice, and while its one-year past earnings growth rate has been negative, its five-year average growth has been overall positive at 23.8%. A healthy stock with an acceptable level of debt at 31.4% of net worth, it’s nevertheless seen some inside selling over the past three months.
Though it’s overvalued by $4 a share compared to its future cash flow value, Goldcorp is trading at book value, and as such may be the best-valued stock on this list at the moment. A rare (for a mining stock) dividend yield of 0.69% is nice to see, but the main reason to buy is an expected 134.8% annual growth in earnings.
Lithium Americas (TSX:LAC)(NYSE:LAC)
One of the best mining stocks on the TSX index for anybody looking for indirect exposure to either tech or the electric vehicle industries, Lithium Americas ticks a lot of boxes. A significant volume of shares bought by Lithium Americas insiders in the last three months, showing that those in the know seem to be thinking the same way.
Indeed, up 18.36% in the last five days, Lithium Americas is showing that it can function simply as a pure-play mining stock that can still reward investors with upside potential. A 42.7% expected annual growth in earnings looks set to continue this trend, and while its five-year average earnings rate of growth has been negative, its one-year rate has been positive at 20.5%.
Barrick Gold (TSX:ABX)(NYSE:GOLD)
Trading at twice the book price, Barrick Gold is overvalued by $5 a share, though with a potential 91.4% annual rise in earnings on the way, growth investors have a solid gold reason to buy. Inside buying of shares in Barrick Gold has been significant in the last three months, and while it has seen a negative one-year past earnings growth rate, it is mitigated somewhat by a respectable 56.6% five-year average.
Wesdome Gold Mines (TSX:WDO)
Up 5.16% in the last five days, this outperforming stock is looking like a buy. Its one-year past earnings-growth rate of 237.2% trounced its own five-year average rate of 47.3%, and with just 5.5% debt of net worth, it’s got a squeaky-clean balance sheet.
Valued almost evenly with its future share price value, Wesdome Gold Mines is trading with a P/E of 60.9 times earnings and P/B of 4.6 times book (higher than Lithium Americas’s P/B of 3.5 times book). Still, with an expected 61.3% expected annual growth in earnings, it’s looking like a buy.
The bottom line
Wesdome Gold Mine’s upward trending share price and strong track record make for a solid pick in terms of upside potential. Lithium Americas is likewise a solid choice for upside, and it’s healthy, too, with a balance sheet typified by a low level of debt at 11.5% of net worth. Barrick Gold offers the passive-income investor a dividend yield of 1.2%, meanwhile, with Goldcorp being the high-growth favourite.
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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.