The Canadian stock market volatility has significantly increased in the last few years due to several macroeconomic and geopolitical factors, making it difficult for investors to pick the right stocks for their portfolios.
Nonetheless, shares of some reliable metal and mining companies, like First Quantum Minerals (TSX:FM), have continued to outperform the broader market by a wide margin, despite the growing economic concerns and market turmoil. To give you an idea, FM stock has yielded an outstanding 491% positive returns since the end of 2015 against the TSX Composite Index’s 55% positive returns.
Before I highlight why First Quantum could still be a great stock to buy in 2023 for the long term, let’s quickly take a closer look at some fundamental factors responsible for this stock’s outstanding performance in recent years.
First Quantum Minerals stock
If you don’t know it already, First Quantum Minerals is a Vancouver-headquartered mining firm with its primary focus on copper production in the form of concentrate, cathode, and anode. It currently has a market cap of $21.2 billion, as its stock trades at $30.60 per share with nearly 8% year-to-date gains. First Quantum’s business is geographically well diversified, with China, India, Zambia, and Japan being some of its key markets based on its revenue.
After witnessing a sharp rally in the previous couple of years to reach their highest level ever, copper prices cooled down more than 14% in 2022, affecting shares of mining companies, including First Quantum. This is one of the key reasons FM stock witnessed a 6.5% correction last year after rallying by 174% in the previous three years.
Despite recent declines in metals prices, the ongoing long-term growth trends in First Quantum’s financials look impressive. Higher production and better pricing drove the Canadian metal miner’s revenue up by 92% in four years between 2018 and 2022. More importantly, its adjusted net profit also jumped 117% during these four years, with the adjusted net profit margin expanding from 12.3% to 14%. This robust sales and profitability growth justifies why First Quantum stock has outperformed the broader market by a big margin in recent years.
Is it still a great copper-clad investment opportunity?
On the one hand, First Quantum continues to focus on increasing its production with efforts like CP100 expansion at the Cobre Panamá mine and S3 expansion at the Kansanshi mine. On the other hand, it’s also prioritizing debt reduction to strengthen its balance sheet. These factors have the potential to further improve the company’s financial growth trends in the long run and help FM stock soar.
At the macro level, slowing global economic growth and the possibility of a looming recession are two main reasons for a sharp decline in metals prices in recent months. While these negative factors may continue to hurt commodity investors’ sentiments in the short term, the long-term outlook for copper prices remains bullish due mainly to continued strong global demand, especially from emerging markets. Strengthening commodity prices should support a rally in the shares of fundamentally strong mining companies like First Quantum, making it an attractive TSX stock to buy for the long term.
