Is Hudbay Minerals Inc.’s (TSE:HBM) Growth Strong Enough To Justify Its May Share Price?

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Hudbay Minerals Inc. (TSE:HBM) is considered a high growth stock. However its last closing price of CA$8.9 left investors wondering whether this growth has already been factored into the share price. Let’s look into this by assessing HBM’s expected growth over the next few years.

View our latest analysis for Hudbay Minerals

What are the future expectations?

Hudbay Minerals is poised for significantly high earnings growth in the near future. The consensus forecast from 14 analysts is extremely positive with earnings forecasted to rise significantly from today’s level of $0.327 to $0.403 over the next three years. This indicates an estimated earnings growth rate of 29% per year, on average, which signals a market-beating outlook in the upcoming years.

Is HBM’s share price justifiable by its earnings growth?

HBM is trading at price-to-earnings (PE) ratio of 20.23x, which suggests that Hudbay Minerals is overvalued based on current earnings compared to the Metals and Mining industry average of 12.96x , and overvalued compared to the CA market average ratio of 15.12x .

TSX:HBM Price Estimation Relative to Market, May 2nd 2019
TSX:HBM Price Estimation Relative to Market, May 2nd 2019

We understand HBM seems to be overvalued based on its current earnings, compared to its industry peers. However, since Hudbay Minerals is a high-growth stock, we must also account for its earnings growth by using calculation called the PEG ratio. A PE ratio of 20.23x and expected year-on-year earnings growth of 29% give Hudbay Minerals a very low PEG ratio of 0.71x. Based on this growth, Hudbay Minerals’s stock can be considered relatively cheap , based on the fundamentals.

What this means for you:

HBM’s current undervaluation could signal a potential buying opportunity to increase your exposure to the stock, or it you’re a potential investor, now may be the right time to buy. However, basing your investment decision off one metric alone is certainly not sufficient. There are many things I have not taken into account in this article and the PEG ratio is very one-dimensional. If you have not done so already, I urge you to complete your research by taking a look at the following:

  1. Financial Health: Are HBM’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
  2. Past Track Record: Has HBM been consistently performing well irrespective of the ups and downs in the market? Go into more detail in the past performance analysis and take a look at the free visual representations of HBM’s historicals for more clarity.
  3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.