Goldquest Mining Corp (TSXV:GQC), a CA$54.73M 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, negative growth in the upcoming year , and a low 5.55% growth over the next couple of years. This rate is larger than the growth rate of the Canadian stock market as a whole. Is the metals and mining industry an attractive sector-play right now? In this article, I’ll take you through the sector growth expectations, as well as evaluate whether Goldquest Mining is lagging or leading its competitors in the industry. View our latest analysis for Goldquest Mining
What’s the catalyst for Goldquest Mining’s sector growth?
Altogether 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 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 thirties, beating the Canadian market growth of 13.92%. Goldquest Mining 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 Goldquest Mining may be trading cheaper than its peers.
Is Goldquest Mining and the sector relatively cheap?
The metals and mining sector’s PE is currently hovering around 10.44x, lower than the rest of the Canadian stock market PE of 15.57x. 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 8.82% on equities compared to the market’s 9.81%. Since Goldquest Mining’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge Goldquest Mining’s value is to assume the stock should be relatively in-line with its industry.
Next Steps:Goldquest Mining has been a metals and mining industry laggard in the past year. If Goldquest Mining 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 Goldquest Mining’s fundamentals in order to build a holistic investment thesis.
- 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.
- Historical Track Record: What has GQC’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.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Goldquest Mining? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!