Why You Should Be Bullish On Griffin Mining Limited (LON:GFM)

Griffin Mining Limited (AIM:GFM) continues to post impressive revenue growth and its prospects have never been brighter. Its share price has been relatively constant over the last three months; most recently UK£1.51 at the time of posting. I've been researching GFM for a while, so in this article I've written a brief commentary on the key things you'd need to believe in order to be long GFM.

Firstly, a quick intro on the company - Griffin Mining Limited, a mining and investment company, engages in the mining, exploration, and development of mineral properties. Started in 1988, it operates in United Kingdom and is recently valued at UK£261.32M.

The company is growing incredibly fast, with a year-on-year revenue growth of 91.12% over the past financial year , and a bottom line growth of 632.52%. Since 2013, sales has risen 2.89%, parallel with larger capital expenditure, which most recently reached US$13.46M. An expected return on investment of 16.99% over the next three years is a result of GFM's reinvestment into the business, according to the consensus of broker analysts covering the stock. Net income is expected to reach US$49.50M in the upcoming year, and over the next five years, earnings are predicted to rise at an annual rate of 7.04% on average, compared to the industry average growth of 4.37%. These figures illustrate GFM's strong track record of producing profit to its investors, with an efficient approach to reinvesting into the business, and a buoyant future compared to peers in the sector.

Limiting your downside risk is an important part of investing, and financial health is a key determinant on whether GFM is a risky investment or not. Griffin Mining's balance sheet is robust, with high levels of cash generated from its core operating activities (17.58x debt) able to service its borrowings. Furthermore, GFM's debt level is at an appropriate 2.30% of equity and has been declining over the past five years from 33.10%. GFM also generates a sufficient level of earnings which amply covers its annual interest payment 30.72x. The company shows the ability to manage its capital requirements well, increasing my conviction of the sustainability of the business going forward.

GFM is now trading at UK£1.51 per share. With 172.49 million shares, that's a UK£261.32M market cap - quite low for a business that has has a 5-year free cash flow cumulative average growth rate (CAGR) of 9.00% (source: analyst consensus). Given the consensus 2018 FCF level of US$49.10M, the target price for GFM is US$3.16. This indicates that the stock is currently priced at a large discount. Moreover, comparing GFM's current share price to its peers based on its industry and earnings level, it's undervalued by 67.76%, with a PE ratio of 8.02x vs. the industry average of 13.46x.

GFM is a stock with outstanding fundamental characteristics. I like the company because of the growth story, the possibility that it is yet to be factored into the share price, and the strong capital management. For all the charts illustrating this analysis, take a look at the Simply Wall St platform, which is where I've taken my data from.

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Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.