Investing experts and analysts go through a rigorous process to determine the right undervalued stocks to identify them as good investments. They consider the company’s financial strength, closely examine various performance metrics, and see how the underlying company fares against economic fluctuations.
Analysts looking at materials stocks also consider the prices for underlying commodities that affect the performance of each stock. Changes in commodity prices can reflect the growth or shrinkage of a company’s profitability. Suppose you are considering a company heavily involved with gold mining, and the price for gold shoots up. In that case, the company’s overall revenue and profitability might increase.
Geopolitical factors can also have a positive or negative impact on materials-related stocks. Favourable conditions can improve operational efficiency, while instability can pose problems. Considering this backdrop, here are three of the top Canadian materials stocks to observe.
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Wheaton Precious Metals
Wheaton Precious Metals (TSX: WPM) is a $43.95 billion market cap precious metals streaming company, one of the largest of its kind worldwide. The company generates revenue via agreements to purchase a portion or all of the precious metals and cobalt from high-quality mines. Its focus on low-cost and long-life assets gives it a defensive appeal.
The stock performed well in the third quarter of Fiscal 2024, reporting over 300 million in revenue and over $250 million in operating cash flow. It has a solid balance sheet for future expansions. As of this writing, it trades for $96.87 per share and offers dividends at a 0.89% dividend yield.
Teck Resources
Teck Resources (TSX: TECK.B) is a $31.55 billion market cap diversified mining company with oil sands, zinc, coal, and copper operations in Canada, the U.S., Peru, and Chile. Metallurgical coal makes up for most of its commodity focus, with the company ranking as the second-largest exporter of seaborne metallurgical coal. It also has substantial copper and zinc operations.
The company’s third quarter (Q3) in fiscal 2024 saw it exceed the analyst expectation for adjusted profits per share by $0.23 after reporting an adjusted profit per share of $0.60. Its increased copper production via the Quebrada Blanca mine contributed significantly to this and set it up for significant further growth. As of this writing, the stock trades for $61.77 per share.
Pan American Silver Corp
Pan American Silver (TSX: PAAS) is a $13.13 billion market capitalization mining company focusing primarily on exploring and developing silver mines worldwide. It operates primarily in South and Central America and also benefits from selling byproducts from silver mining operations, including gold, copper, lead, and zinc.
Its Q3 fiscal 2024 saw the company report a record $716.1 million in revenue. The company’s strong performance in the quarter reflects its operational efficiency and how favourable market conditions improve its financials. As of this writing, Pan American Silver stock trades for $36.03 per share and offers dividends at a 1.56 % dividend yield.
Foolish takeaway
There are inherent risks with investing in commodities-related stocks. However, conditions seem favourable for these companies. The solid financials provide Wheaton Precious Metals the foundation for further expansion in the future. Teck Resources will likely benefit from the increasing shift to sustainability. Pan American Silver has robust production metrics that will favour the company as demand for silver increases.
Any of these three can be good investments to consider if you seek exposure to the commodities market.
