Stocks that have generated maximum returns in the last three years are part of the TSX30 Index. While Canada’s tech giant Shopify (TSX: SHOP)(NYSE:SHOP) has returned a staggering 846% in the last three years, Aura Minerals (TSX: ORA) is up over 1,125% in this period.
Shopify has been a massive wealth creator for long-term investors, crushing the broader markets since its initial public offering (IPO). But this little-known mining stock has gained significant traction since October 2018 while offering investors a tasty dividend yield of 7.3%.
Aura Minerals sales have grown to $300 million in 2020
Aura Minerals has grown its revenue from US$157 million in 2017 to almost US$300 million last year. Bay Street expects sales to more than double to US$628.4 million in 2021 and rise by 13.3% to US$712 million in 2022. Its adjusted earnings per share are forecast to rise from US$0.99 per share in 2020 to US$3.61 per share in 2022. Despite its market-thumping gains, the stock is valued at a market cap of $981 million, indicating a price-to-sales multiple of fewer than 1.3 times, which is quite reasonable. It also has a price-to-earnings ratio of just six.
A gold and copper production company, Aura Minerals is focused on the development and operation of gold and base metal projects in the Americas. It operates four mines in Brazil, Mexico, Honduras, and the U.S.
Since 2017, Aura Minerals has increased annual production and EBITDA by 91% and 879% respectively. The company has managed to turn its operations around and restarted the Aranzazu mine at an initial investment of US$20 million. Aura improved its growth profile through multiple accretive acquisitions that also helped it to de-leverage its balance sheet.
In 2021, Aura Minerals has already paid $60 million in dividends at US$0.83 per share or a yield of a healthy 8.3%. It recently completed an initial public offering (IPO) on the Brazil stock exchange by raising US$55 million in gross proceeds. The capital raise will add significant liquidity to Aura’s balance sheet and expand financing capabilities in Latin America.
What next for investors?
Aura Minerals expects to more than double its annual production between 2020 and 2024 on the back of diversified mining capabilities. In the first half of 2021, the company’s sales stood at US$464 million, already surpassing prior-year sales. Its EBITDA margin has also risen at a significant pace from 12% in 2017 to over 40% in 2021.
While Aura Minerals has delivered exponential gains to investors since the start of 2020, you need to understand that it was driven by high copper and gold prices. Its future profitability, operating cash flows, and financial position is closely tied to the prices of gold and copper that in turn depend on supply and demand metrics and the strength of the U.S. dollar.
Aura Minerals management expects the short-to-medium turn economic environment to remain supportive for commodity prices with continued volatility. Aura’s cheap valuation and stellar growth metrics coupled with its strong balance sheet render it an attractive bet for value and growth investors.
