Gentor Resources Inc (TSXV:GNT), a CA$1.97M 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. 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 relatively muted growth of 1.18% 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. Below, I will examine the sector growth prospects, and also determine whether Gentor Resources is a laggard or leader relative to its basic materials sector peers. See our latest analysis for Gentor Resources
What’s the catalyst for Gentor Resources’s sector growth?
Overall, the basic materials sector seems like it has reached maturity in its life cycle. Companies appear to be vastly competitive and consolidation seems to be a inevitable. 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 12.46%. Gentor 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 Gentor Resources may be trading cheaper than its peers.
Is Gentor Resources and the sector relatively cheap?
The metals and mining industry is trading at a PE ratio of 11.11x, below the broader Canadian stock market PE of 16.26x. This illustrates a somewhat under-priced sector compared to the rest of the market. Though, the industry returned a similar 7.31% on equities compared to the market’s 9.13%. Since Gentor Resources’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge Gentor Resources’s value is to assume the stock should be relatively in-line with its industry.
Next Steps:Gentor Resources has been a metals and mining industry laggard in the past year. If Gentor 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 Gentor 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 GNT’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 Gentor 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!