Gem Diamonds (LSE:GEMD) - Share price, News & Analysis

Q: What is the Fair Price of GEMD when looking at its future cash flows? For this estimate we use a Discounted Cash Flow model.

GEMD (£0.43) is trading above our estimate of [[fair value]] (£0.28)

GEMD fundamental analysis
Snowflake Score
Valuation	4/6
Future Growth	3/6
Past Performance	3/6
Financial Health	5/6
Dividends	2/6

GEMD Stock Overview

Gem Diamonds Limited operates diamond mines.

Rewards

Price-To-Earnings ratio (4x) is below the UK market (14.3x)

Earnings are forecast to grow 12.7% per year

Earnings have grown 67% per year over the past 5 years

Risk Analysis

Dividend of 5.1% is not well covered by earnings

Does not have a meaningful market cap (£60M)

Gem Diamonds Competitors

Petra Diamonds

LSE:PDL

UK£182.5m

Jangada Mines

AIM:JAN

UK£12.0m

Sylvania Platinum

AIM:SLP

UK£232.2m

Jubilee Metals Group

AIM:JLP

UK£386.6m

Price History & Performance

Summary of all time highs, changes and price drops for Gem Diamonds
Historical stock prices
Current Share Price	UK£0.43
52 Week High	UK£0.76
52 Week Low	UK£0.42
Beta	1.17
1 Month Change	-26.62%
3 Month Change	-32.81%
1 Year Change	-41.89%
3 Year Change	-44.16%
5 Year Change	-53.76%
Change since IPO	-95.76%

Recent News & Updates

Jun 24

Gem Diamonds (LON:GEMD) May Have Issues Allocating Its Capital

Finding a business that has the potential to grow substantially is not easy, but it is possible if we look at a few key...

Shareholder Returns

	GEMD	GB Metals and Mining	GB Market
7D	-10.8%	-4.6%	2.3%
1Y	-41.9%	-10.1%	-8.6%

Return vs Industry: GEMD underperformed the UK Metals and Mining industry which returned -10.1% over the past year.

Return vs Market: GEMD underperformed the UK Market which returned -8.6% over the past year.

Price Volatility

Is GEMD's price volatile compared to industry and market?
GEMD volatility
GEMD Average Weekly Movement	7.4%
Metals and Mining Industry Average Movement	7.6%
Market Average Movement	5.5%
10% most volatile stocks in GB Market	10.8%
10% least volatile stocks in GB Market	2.8%

Stable Share Price: GEMD is not significantly more volatile than the rest of UK stocks over the past 3 months, typically moving +/- 7% a week.

Volatility Over Time: GEMD's weekly volatility (7%) has been stable over the past year.

About the Company

Founded	Employees	CEO	Website
2005	353	Clifford Elphick	https://www.gemdiamonds.com

Gem Diamonds Limited operates diamond mines. The company’s flagship project is the Letšeng mine located in the located in the Maluti Mountains of Lesotho. It is also involved in the production, manufacture, wholesale, retail, and marketing rough and polished diamonds.

Gem Diamonds Fundamentals Summary

How do Gem Diamonds's earnings and revenue compare to its market cap?
GEMD fundamental statistics
Market Cap	US$78.80m
Earnings (TTM)	US$18.52m
Revenue (TTM)	US$201.86m

4.0x

P/E Ratio

0.4x

P/S Ratio

Is GEMD overvalued?

See Fair Value and valuation analysis

Earnings & Revenue

Key profitability statistics from the latest earnings report
GEMD income statement (TTM)
Revenue	US$201.86m
Cost of Revenue	US$143.51m
Gross Profit	US$58.35m
Other Expenses	US$39.83m
Earnings	US$18.52m

Last Reported Earnings

Dec 31, 2021

Next Earnings Date

n/a

Earnings per share (EPS)	0.13
Gross Margin	28.91%
Net Profit Margin	9.18%
Debt/Equity Ratio	4.5%

How did GEMD perform over the long term?

See historical performance and comparison

Dividends

5.1%

Current Dividend Yield

20%

Payout Ratio

We’ve recently updated our valuation analysis.

Valuation

Is GEMD undervalued compared to its fair value, analyst forecasts and its price relative to the market?

Valuation Score

4/6

Valuation Score 4/6

Price-To-Earnings vs Peers
Price-To-Earnings vs Industry
Price-To-Earnings vs Fair Ratio
Below Fair Value
Significantly Below Fair Value
PEG Ratio

Key Valuation Metric

Which metric is best to use when looking at relative valuation for GEMD?

Other financial metrics that can be useful for relative valuation.

The above table shows the n/a ratio for GEMD. This is calculated by dividing GEMD's market cap by their current preferred multiple.
What is GEMD's n/a Ratio?
n/a Ratio	0x
n/a	n/a
Market Cap	US$78.80m

GEMD key valuation metrics and ratios. From Price to Earnings, Price to Sales and Price to Book to Price to Earnings Growth Ratio, Enterprise Value and EBITDA.
Key Statistics
Enterprise Value/Revenue	0.7x
Enterprise Value/EBITDA	2.6x
PEG Ratio	0.3x

Price to Earnings Ratio vs Peers

How does GEMD's PE Ratio compare to its peers?

GEMD PE Ratio vs Peers

The above table shows the PE ratio for GEMD vs its peers. Here we also display the market cap and forecasted growth for additional consideration.
Company	PE	Estimated Growth	Market Cap
Peer Average	17x
PDL Petra Diamonds	1x	-39.8%	UK£182.5m
JAN Jangada Mines	49.3x	n/a	UK£12.0m
SLP Sylvania Platinum	3.4x	-3.7%	UK£232.2m
JLP Jubilee Metals Group	13.6x	48.8%	UK£386.6m
GEMD Gem Diamonds	4x	12.7%	UK£59.9m

Forward PE

Price-To-Earnings vs Peers: GEMD is good value based on its Price-To-Earnings Ratio (4x) compared to the peer average (16.8x).

Price to Earnings Ratio vs Industry

How does GEMD's PE Ratio compare vs other companies in the GB Metals and Mining Industry?

Price-To-Earnings vs Industry: GEMD is good value based on its Price-To-Earnings Ratio (4x) compared to the UK Metals and Mining industry average (5.5x)

Price to Earnings Ratio vs Fair Ratio

What is GEMD's PE Ratio compared to its Fair PE Ratio? This is the expected PE Ratio taking into account the company's forecast earnings growth, profit margins and other risk factors.

GEMD PE Ratio vs Fair Ratio.
Fair Ratio
Current PE Ratio	4x
Fair PE Ratio	11x

Price-To-Earnings vs Fair Ratio: GEMD is good value based on its Price-To-Earnings Ratio (4x) compared to the estimated Fair Price-To-Earnings Ratio (10.9x).

Share Price vs Fair Value

What is the Fair Price of GEMD when looking at its future cash flows? For this estimate we use a Discounted Cash Flow model.

Below Fair Value: GEMD (£0.43) is trading above our estimate of fair value (£0.28)

Significantly Below Fair Value: GEMD is trading above our estimate of fair value.

Price to Earnings Growth Ratio

PEG Ratio: GEMD is good value based on its PEG Ratio (0.3x)

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Future Growth

How is Gem Diamonds forecast to perform in the next 1 to 3 years based on estimates from 5 analysts?

Future Growth Score

3/6

Future Growth Score 3/6

Earnings vs Savings Rate
Earnings vs Market
High Growth Earnings
Revenue vs Market
High Growth Revenue
Future ROE

12.7%

Forecasted annual earnings growth

Earnings and Revenue Growth Forecasts

Analyst Future Growth Forecasts

Earnings vs Savings Rate: GEMD's forecast earnings growth (12.7% per year) is above the savings rate (0.9%).

Earnings vs Market: GEMD's earnings (12.7% per year) are forecast to grow faster than the UK market (11% per year).

High Growth Earnings: GEMD's earnings are forecast to grow, but not significantly.

Revenue vs Market: GEMD's revenue (7.1% per year) is forecast to grow faster than the UK market (4.1% per year).

High Growth Revenue: GEMD's revenue (7.1% per year) is forecast to grow slower than 20% per year.

Earnings per Share Growth Forecasts

Future Return on Equity

Future ROE: GEMD's Return on Equity is forecast to be low in 3 years time (7.4%).

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Past Performance

How has Gem Diamonds performed over the past 5 years?

Past Performance Score

3/6

Past Performance Score 3/6

Quality Earnings
Growing Profit Margin
Earnings Trend
Accelerating Growth
Earnings vs Industry
High ROE

67.0%

Historical annual earnings growth

Earnings and Revenue History

Quality Earnings: GEMD has high quality earnings.

Growing Profit Margin: GEMD's current net profit margins (9.2%) are higher than last year (8.9%).

Past Earnings Growth Analysis

Earnings Trend: GEMD has become profitable over the past 5 years, growing earnings by 67% per year.

Accelerating Growth: GEMD's earnings growth over the past year (9.6%) is below its 5-year average (67% per year).

Earnings vs Industry: GEMD earnings growth over the past year (9.6%) underperformed the Metals and Mining industry 41.5%.

Return on Equity

High ROE: GEMD's Return on Equity (12.6%) is considered low.

Discover strong past performing companies

Financial Health

How is Gem Diamonds's financial position?

Financial Health Score

5/6

Financial Health Score 5/6

Short Term Liabilities
Long Term Liabilities
Debt Level
Reducing Debt
Debt Coverage
Interest Coverage

Financial Position Analysis

Short Term Liabilities: GEMD's short term assets ($69.5M) exceed its short term liabilities ($30.0M).

Long Term Liabilities: GEMD's short term assets ($69.5M) do not cover its long term liabilities ($108.0M).

Debt to Equity History and Analysis

Debt Level: GEMD has more cash than its total debt.

Reducing Debt: GEMD's debt to equity ratio has reduced from 13.6% to 4.5% over the past 5 years.

Debt Coverage: GEMD's debt is well covered by operating cash flow (645.7%).

Interest Coverage: GEMD's interest payments on its debt are well covered by EBIT (18.7x coverage).

Balance Sheet

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Dividend

What is Gem Diamonds's current dividend yield, its reliability and sustainability?

Dividend Score

3/6

Dividend Score 3/6

Notable Dividend
High Dividend
Stable Dividend
Growing Dividend
Earnings Coverage
Future Dividend Coverage

5.10%

Current Dividend Yield

Dividend Yield vs Market

Notable Dividend: GEMD's dividend (5.1%) is higher than the bottom 25% of dividend payers in the UK market (1.88%).

High Dividend: GEMD's dividend (5.1%) is low compared to the top 25% of dividend payers in the UK market (5.18%).

Stability and Growth of Payments

Stable Dividend: GEMD has been paying a dividend for less than 10 years and during this time payments have been volatile.

Growing Dividend: GEMD has only been paying a dividend for 7 years, and since then payments have fallen.

Earnings Payout to Shareholders

Earnings Coverage: With its low payout ratio (20.5%), GEMD's dividend payments are well covered by earnings.

Cash Payout to Shareholders

Cash Flow Coverage: With its high cash payout ratio (144.7%), GEMD's dividend payments are not well covered by cash flows.

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Management

How experienced are the management team and are they aligned to shareholders interests?

5.7yrs

Average management tenure

CEO

Clifford Elphick (60 yo)

16.92yrs

Tenure

US$1,363,164

Compensation

Mr. Clifford Thomas Elphick, BCom, BCompt Hons, founded Gem Diamond Mining Company in July 2005 and serves as its Chief Executive Officer. Mr. Elphick serves as the Chief Executive of Gem Diamonds Ltd., wh...

CEO Compensation Analysis

Compensation vs Market: Clifford's total compensation ($USD1.36M) is above average for companies of similar size in the UK market ($USD335.53K).

Compensation vs Earnings: Clifford's compensation has been consistent with company performance over the past year.

Leadership Team

Experienced Management: GEMD's management team is seasoned and experienced (5.7 years average tenure).

Board Members

Experienced Board: GEMD's board of directors are considered experienced (5 years average tenure).

Ownership

Who are the major shareholders and have insiders been buying or selling?

Insider Trading Volume

Insider Buying: Insufficient data to determine if insiders have bought more shares than they have sold in the past 3 months.

Ownership Breakdown

Dilution of Shares: Shareholders have not been meaningfully diluted in the past year.

Data	Last Updated (UTC time)
Company Analysis	2022/06/27 00:00
End of Day Share Price	2022/06/27 00:00
Earnings	2021/12/31
Annual Earnings	2021/12/31