Brightstar Resources (ASX:BTR): Valuation Check After High-Grade Sandstone Hub Drilling Progress

Brightstar Resources (ASX:BTR) has caught traders attention after fresh drilling at its Sandstone Hub delivered high grade gold hits at the Bull Oak and Havilah deposits, alongside progress on its updated Pre Feasibility Study.

See our latest analysis for Brightstar Resources.

The market seems to be catching on to that story, with a 1 day share price return of 13.68% and a stronger 7 day share price return of 20.00%. This has helped turn a relatively modest year to date share price gain and a still respectable 3 year total shareholder return of 44.00% into building, rather than fading, momentum, despite ongoing board changes and the heavy lifting still ahead on development and funding.

If these drilling results have sharpened your appetite for growth stories, it could be a good time to explore fast growing stocks with high insider ownership as potential next opportunities.

Yet even after that surge, Brightstar still trades far below analyst targets and most intrinsic value estimates. This raises a key question for investors: is this genuine undervaluation, or are markets already banking on years of future growth?

Price-to-Sales of 9.3x: Is it justified?

On a price-to-sales ratio of 9.3 times and a last close of A$0.54, Brightstar screens as deeply undervalued against several valuation yardsticks.

The price-to-sales multiple compares the company’s market value to the revenue it currently generates, a common approach for unprofitable resource explorers where earnings are negative. For Brightstar, this lens matters because the business is still loss making but building out projects that could scale revenue meaningfully if development plans land as hoped.

On one side, Brightstar looks attractive versus both the wider Australian Metals and Mining industry and a tighter peer group, where average price-to-sales multiples sit far higher. On the other side, our SWS fair ratio work implies its current 9.3 times sales is still well above the level the market could gravitate toward if expectations cool, even though the SWS DCF model suggests a far higher long term fair value per share than today’s price.

Compared with the Australian Metals and Mining industry average price-to-sales of 118.5 times and a peer average of 33.7 times, Brightstar’s 9.3 times looks strikingly cheap on a relative basis. Yet versus an estimated fair price-to-sales ratio of just 1.1 times, the same 9.3 times appears stretched, underscoring how sensitive the story is to ambitious growth and margin assumptions.

Explore the SWS fair ratio for Brightstar Resources

Result: Price-to-Sales of 9.3x (UNDERVALUED)

However, investors should remember Brightstar remains loss making and capital intensive, so delays in project development or weaker gold prices could quickly unwind optimism.

Find out about the key risks to this Brightstar Resources narrative.

Another Take on Value

Our DCF model sends an even stronger signal, implying fair value near A$15.92 per share, around 96.6% above the current A$0.54 price. That kind of gap suggests significant potential upside if forecasts land, but also raises the question: are expectations running too hot?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Brightstar Resources for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 904 undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Brightstar Resources Narrative

If you see the numbers differently or want to dig into the details yourself, you can build a personalised view in minutes: Do it your way.

A great starting point for your Brightstar Resources research is our analysis highlighting 2 key rewards and 1 important warning sign that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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