Astorius Resources Ltd (CVE:ASQ): Is Basic Materials An Attractive Sector Play?

Astorius Resources Ltd (TSXV:ASQ), a CA$5.79M small-cap, is a metals and mining operating in an industry which is sensitive to changes in the business cycle, as it supplies materials for construction activities. Moreover, 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, negative growth in the upcoming year , and an overall negative growth rate in the next couple of years. Unsuprisingly, this is below 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. Today, I will analyse the industry outlook, and also determine whether Astorius Resources is a laggard or leader relative to its basic materials sector peers. Check out our latest analysis for Astorius Resources

What’s the catalyst for Astorius Resources's sector growth?

Altogether the basic materials sector seems to be predominantly mature in terms of its industry life cycle. Companies appear to be highly competitive and consolidation seems to be a natural trend. However, the industry is still facing many emerging trends including the reduction of waste, raw material inflation, and innovation in global supply chain management. In the previous year, the industry saw growth in the forties, beating the Canadian market growth of 13.87%. Astorius Resources 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 Astorius Resources may be trading cheaper than its peers.

Is Astorius Resources and the sector relatively cheap?

The metals and mining industry is trading at a PE ratio of 10.57x, below the broader Canadian stock market PE of 16.16x. This means the industry, on average, is relatively undervalued compared to the wider market - a potential mispricing opportunity here! Though, the industry returned a similar 7.43% on equities compared to the market’s 9.18%. Since Astorius Resources’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge Astorius Resources’s value is to assume the stock should be relatively in-line with its industry.

Next Steps:

Astorius Resources has been a metals and mining industry laggard in the past year. If Astorius Resources has been on your watchlist for a while, now may be a good time to dig deeper into the stock. Although it delivered lower growth relative to its materials peers in the near term, the market may be pessimistic on the stock, leading to a potential undervaluation. However, before you make a decision on the stock, I suggest you look at Astorius Resources's fundamentals in order to build a holistic investment thesis.

• 1. Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
• 2. Historical Track Record: What has ASQ's performance been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
• 3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Astorius Resources? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!

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Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article 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.