Giyani Metals Corp (TSXV:WDG), a CADCA$22.32M small-cap, is a metals and mining operating in an industry which supplies materials for construction. This means it is highly sensitive to changes in the economic cycle, a key driver of building activities. Furthermore, the basic materials sector can be affected by shifts in the housing market, as many produced raw materials are components of construction projects. For example, if new housing development slows, the demand for metal products may also decrease. Basic material analysts are forecasting for the entire industry, a positive double-digit growth of 25.66% in the upcoming year , and a massive growth of 64.14% over the next couple of years. This rate is larger than the growth rate of the Canadian stock market as a whole. An interesting question to explore is whether we can we benefit from entering into the metals and mining sector right now. In this article, I’ll take you through the sector growth expectations, as well as evaluate whether WDG is lagging or leading its competitors in the industry. View our latest analysis for Giyani Metals
What’s the catalyst for WDG’s sector growth?
Altogether the basic materials sector seems like it has reached maturity in its life cycle. Companies appear to be highly competitive and consolidation seems to be a common theme. There are plenty of emerging trends to deal with across the board including the reduction of waste, raw material inflation, and innovation in global supply chain management. In the past year, the industry delivered growth of over 50%, beating the Canadian market growth of 8.26%. WDG lags the pack with its sustained negative earnings over the past couple of years. The company’s outlook seems uncertain, with a lack of analyst coverage, which doesn’t boost our confidence in the stock. This lack of growth and transparency means WDG may be trading cheaper than its peers.
Is WDG and the sector relatively cheap?
metals and mining companies are typically trading at a PE of 11x, lower than the rest of the Canadian stock market PE of 17x. This illustrates a somewhat under-priced sector compared to the rest of the market. Though, the industry returned a similar 8.60% on equities compared to the market’s 9.62%. Since WDG’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge WDG’s value is to assume the stock should be relatively in-line with its industry.
What this means for you:
Are you a shareholder? WDG recently delivered an industry-beating growth rate in earnings, which is a positive for shareholders. If you’re bullish on the stock and well-diversified by industry, you may decide to hold onto WDG as part of your portfolio. However, if you’re relatively concentrated in metals and mining, you may want to value WDG based on its cash flows to determine if it is overpriced based on its current growth outlook.
Are you a potential investor? If WDG has been on your watchlist for a while, now may be the time to enter into the stock, if you like its ability to deliver growth and are not highly concentrated in the metals and mining industry. However, before you make a decision on the stock, I suggest you look at WDG’s future cash flows in order to assess whether the stock is trading at a reasonable price, as well as other important fundamentals such as the company’s financial health in order to build a holistic investment thesis.
For a deeper dive into Giyani Metals’s stock, take a look at the company’s latest free analysis report to find out more on its financial health and other fundamentals. Interested in other basic materials stocks instead? Use our free playform to see my list of over 2000 other basic materials companies trading on the market.