Independence Gold Corp (TSXV:IGO), 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$0.2 at one point, and dropping to the lows of CA$0.1. 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 Independence Gold’s current trading price of CA$0.1 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 Independence Gold’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change. See our latest analysis for Independence Gold
What is Independence Gold worth?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 Independence Gold’s ratio of 0.4x is trading slightly below its industry peers’ ratio of 1.1x, which means if you buy Independence Gold today, you’d be paying a relatively fair price for it. And if you believe Independence Gold should be trading in this range, then there isn’t much room for the share price grow beyond what it’s currently trading. So, is there another chance to buy low in the future? Given that Independence Gold’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 Independence Gold generate?Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. 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. Though in the case of Independence Gold, it is expected to deliver a relatively unexciting earnings growth of 4.69%, which doesn’t help build up its investment thesis. Growth doesn’t appear to be a main reason for a buy decision for the company, at least in the near term.
What this means for you:
Are you a shareholder? Independence Gold’s future growth appears to have been factored into the current share price, 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 Independence Gold? Will you have enough confidence to invest in the company should the price drop below its fair value?
Are you a potential investor? If you’ve been keeping an eye on Independence Gold, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive growth outlook may mean it’s worth diving deeper into other factors 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 Independence Gold. You can find everything you need to know about Independence Gold in the latest infographic research report. If you are no longer interested in Independence Gold, you can use our free platform to see my list of over 50 other stocks with a high growth potential.