Goldquest Mining Corp (TSXV:GQC), a metals and mining company based in Canada, received a lot of attention from a substantial price movement on the TSXV in the over the last few months, increasing to CA$0.44 at one point, and dropping to the lows of CA$0.2. This high level of volatility gives investors the opportunity to enter into the stock, and potentially buy at an artificially low price. A question to answer is whether Goldquest Mining’s current trading price of CA$0.2 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Goldquest Mining’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change. Check out our latest analysis for Goldquest Mining
Is Goldquest Mining still cheap?The stock seems fairly valued at the moment according to my relative valuation model. In this instance, I’ve used the price-to-book (PB) ratio given that there is not enough information to reliably forecast the stock’s cash flows, and its earnings doesn’t seem to reflect its true value. I find that Goldquest Mining’s ratio of 2.01x is trading slightly above its industry peers’ ratio of 1.09x, which means if you buy Goldquest Mining today, you’d be paying a relatively fair price for it. And if you believe that Goldquest Mining should be trading at this level in the long run, there’s only an insignificant downside when the price falls to its real value. So, is there another chance to buy low in the future? Given that Goldquest Mining’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.
What kind of growth will Goldquest Mining generate?Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. With profit expected to grow by 27.58% over the next couple of years, the future seems bright for Goldquest Mining. It looks like higher cash flows is on the cards for the stock, which should feed into a higher share valuation.
What this means for you:
Are you a shareholder? It seems like the market has already priced in GQC’s positive outlook, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at GQC? Will you have enough conviction to buy should the price fluctuates below the true value?
Are you a potential investor? If you’ve been keeping an eye on GQC, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for GQC, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Goldquest Mining. You can find everything you need to know about Goldquest Mining in the latest infographic research report. If you are no longer interested in Goldquest Mining, you can use our free platform to see my list of over 50 other stocks with a high growth potential.