Mason Graphite Inc (TSXV:LLG), a metals and mining company based in Canada, saw a double-digit share price rise of over 10% in the past couple of months on the TSXV. Less-covered, small caps sees more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Let’s examine Mason Graphite’s valuation and outlook in more detail to determine if there’s still a bargain opportunity. See our latest analysis for Mason Graphite
What is Mason Graphite worth?Mason Graphite is currently overpriced based on my relative valuation model. In this instance, I’ve used price-to-book ratio (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 Mason Graphite’s ratio of 5.61x is above its peer average of 1.07x, which suggests the stock is overvalued compared to the Metals and Mining industry. If you like the stock, you may want to keep an eye out for a potential price decline in the future. Given that Mason Graphite’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 another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.
What does the future of Mason Graphite look like?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. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company’s future expectations. However, with an extremely negative double-digit change in profit expected next year, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for Mason Graphite, at least in the near future.
What this means for you:
Are you a shareholder? If you believe LLG should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. Given the risk from a negative growth outlook, this could be the right time to de-risk your portfolio. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping tabs on LLG for some time, now may not be the best time to enter into the stock. Its price has risen beyond its industry peers, on top of a negative future outlook. However, there are also other important factors which we haven’t considered today, such as the track record of its management. Should the price fall in the future, will you be well-informed enough to buy?
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Mason Graphite. You can find everything you need to know about Mason Graphite in the latest infographic research report. If you are no longer interested in Mason Graphite, you can use our free platform to see my list of over 50 other stocks with a high growth potential.