With a daily loss of -5.65%, a 3-month loss of -3.71%, and a per-share loss of $0.13, Hudbay Minerals Inc (HBM, Financial) seems to be modestly undervalued. This article aims to provide a thorough valuation analysis of Hudbay Minerals (HBM) to help investors make informed decisions. We encourage you to read on for an in-depth understanding of the company's value.
Company Overview
Hudbay Minerals Inc is a Canadian mining company with operations, property developments, and exploration activities spread across the United States. The company is primarily focused on the discovery, production, and marketing of base and precious metals.
The company's major mines are located in Manitoba, Canada; Arizona, United States; and Peru. Hudbay Minerals produces copper concentrate, which contains copper, gold, and silver, as well as zinc metal. More than half of the company's revenue is attributable to the copper business. The company sells copper concentrates to smelters across Asia, America, and Europe, and sells zinc metal, the next biggest source of revenue, to industrial customers across North America.
At its current price of $4.6 per share, Hudbay Minerals has a market cap of $1.60 billion. The stock's GF Value, an estimation of its fair value, is $6.27. This discrepancy suggests that the stock might be modestly undervalued.
Understanding GF Value
The GF Value is a proprietary measure that represents the current intrinsic value of a stock. It's calculated based on historical multiples, a GuruFocus adjustment factor based on the company's past returns and growth, and future estimates of the business performance. The GF Value Line on our summary page gives an overview of the fair value that the stock should be traded at.
If the stock price is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. On the other hand, if it is significantly below the GF Value Line, its future return will likely be higher.
Given Hudbay Minerals' current stock price and market cap, the stock appears to be modestly undervalued. As a result, the long-term return of its stock is likely to be higher than its business growth.
Financial Strength
Before investing in a company, it's crucial to assess its financial strength. Investing in companies with poor financial strength can result in a higher risk of permanent loss. A great way to understand the financial strength of a company is to look at the cash-to-debt ratio and interest coverage. Hudbay Minerals has a cash-to-debt ratio of 0.12, which is worse than 90.18% of 2628 companies in the Metals & Mining industry. The overall financial strength of Hudbay Minerals is 5 out of 10, which indicates that the financial strength of Hudbay Minerals is fair.
Profitability and Growth
Investing in profitable companies carries less risk, especially in companies that have demonstrated consistent profitability over the long term. Typically, a company with high profit margins offers better performance potential than a company with low profit margins. Hudbay Minerals has been profitable 4 years over the past 10 years. During the past 12 months, the company had revenues of $1.30 billion and Loss Per Share of $0.13. Its operating margin of 19.48% is better than 81.64% of 855 companies in the Metals & Mining industry. Overall, GuruFocus ranks Hudbay Minerals's profitability as fair.
Growth is probably the most important factor in the valuation of a company. GuruFocus research has found that growth is closely correlated with the long-term performance of a company's stock. The faster a company is growing, the more likely it is to be creating value for shareholders, especially if the growth is profitable. The 3-year average annual revenue growth rate of Hudbay Minerals is 6.7%, which ranks worse than 62.94% of 599 companies in the Metals & Mining industry. The 3-year average EBITDA growth rate is 0%, which ranks worse than 0% of 1846 companies in the Metals & Mining industry.
ROIC vs WACC
Another way to evaluate a company's profitability is to compare its return on invested capital (ROIC) to its weighted cost of capital (WACC). Return on invested capital (ROIC) measures how well a company generates cash flow relative to the capital it has invested in its business. The weighted average cost of capital (WACC) is the rate that a company is expected to pay on average to all its security holders to finance its assets. If the ROIC is higher than the WACC, it indicates that the company is creating value for shareholders. Over the past 12 months, Hudbay Minerals's ROIC was 7.59, while its WACC came in at 12.49.
Conclusion
In conclusion, the stock of Hudbay Minerals (HBM, Financial) shows every sign of being modestly undervalued. The company's financial condition is fair and its profitability is fair. Its growth ranks worse than 0% of 1846 companies in the Metals & Mining industry. To learn more about Hudbay Minerals stock, you can check out its 30-Year Financials here.
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