Again, I’m not reviewing all 46 of the stocks that are categorized in the Materials sector in the TSX. Rather, I’ll pick the most interesting, to try and show some opportunity and some variety. These are mainly miners of gold and silver and producers of timber. A number of the companies were excluded because their earnings have been negative for the past 2, 3 or more years. Disclosure: I don’t own and don’t plan to buy any of these.

Gold Producers

The gold price is currently stable or rising, thanks probably to the turmoil in the stocks markets. Gold producers may be a short-term haven.

Agnico Eagle Mines

Symbol: AEM on the TSX. The price at Monday close was $40.85, which is near the 52-week high of $43.70 (overvalued). (Chart.) The price is 0.37% higher than last week’s price ($40.70), and 8.64% higher than last month’s price ($37.60), and 7.19% higher than the price one year ago ($38.11). The current yield is 1.08%, which is above the 10 year average of 0.72% (undervalued). The P/E ratio is 558.86, above the 10 year average of 199.31 (overvalued). The Price/Book ratio is 2.14, below the 10 year average of 2.75 (undervalued). Market capitalization is $8.51B (large cap).

Earnings per share are positive and have been falling lately. I think that the share price will reach $45.92 in about five years. This would represent an annual compound growth rate of 2.37% per year, plus and annual dividend of 1.08% dividend yield per year. Over a 5-year time frame, that’s 3.45% CAGR. This is a momentum stock, and I would look for a short-term gain, selling if it reaches $46.00.

Barrick Gold

Symbol: ABX on the TSX. The price at Monday close was $11.62, which is midway between the 52-week low of $7.89 and the 52-week high of $16.54 (fairly valued). (Chart.) The price is 3.01% higher than last week’s price ($11.28), and 10.35% higher than last month’s price ($10.53), and -28.14% lower than the price one year ago ($16.17). The current yield is 0.96%, which is below the 10 year average of 1.26% (overvalued). The P/E ratio is negative, as is the 10 year average P/E. The Price/Book ratio is 1.38, below the 10 year average of 1.92 (undervalued). Market capitalization is $12.95B (large cap).

Earnings per share are negative and have been falling steadily. I think that the share price will reach $24.68 in about five years. If it survives, because I don’t like the rising debt. This would represent an annual compound growth rate of 16.26% per year, plus and annual dividend of 0.96% dividend yield per year. Over a 5-year time frame, that’s 17.22% CAGR. This is a momentum stock, and I would sell it once it reaches $16.00.

Semafo

Symbol: SMF on the TSX. The price at Monday close was $3.83, which is near the 52-week high of $4.49 (overvalued). (Chart.) The price is -6.59% lower than last week’s price ($4.10), and 4.93% higher than last month’s price ($3.65), and 4.64% higher than the price one year ago ($3.66). The stock pays no dividend. The P/E ratio is 37.23, below the 10 year average of 78.84 (undervalued). The Price/Book ratio is 1.96, below the 10 year average of 2.93 (undervalued). Market capitalization is $1.11B (mid cap).

Earnings per share are positive and have been falling steadily. I think that the share price will reach $4.03 in about five years. This would represent an annual compound growth rate of 1.02% per year. This is a momentum stock, and I would sell once the share price nears its 52-week high of $4.49.

OceanaGold

Symbol: OGC on the TSX. The price at Monday close was $2.68, which is midway between the 52-week low of $1.79 and the 52-week high of $3.18 (fairly valued). (Chart.) The price is -7.59% lower than last week’s price ($2.90), and the same as last month’s price ($2.68), and 7.20% higher than the price one year ago ($2.50). It paid a dividend one time, in February 2015. The P/E ratio is 11.82, below the 10 year average of -405.46 (undervalued). The Price/Book ratio is 1.19, near the 10 year average of 1.16 (fairly valued). Market capitalization is $1.57B (mid cap).

Earnings per share are positive, but have been volatile. I think that the share price will reach $2.95 in about five years. This would represent an annual compound growth rate of 1.91% per year, plus any dividend it may pay. This is a value stock and will require patience and luck.

Silver Producers

Franco-Nevada

Symbol: FNV on the TSX. The price at Monday close was $65.24, which is midway between the 52-week low of $49.96 and the 52-week high of $74.10 (fairly valued). (Chart.) The price is -2.04% lower than last week’s price ($66.60), and -0.17% lower than last month’s price ($65.35), and 2.92% higher than the price one year ago ($63.39). The current yield is 1.77%, which is above the 10 year average of 0.86% (undervalued). The P/E ratio is 174.01, above the 10 year average of 130.44 (overvalued). The Price/Book ratio is 3.16, above the 10 year average of 2.39 (overvalued). Market capitalization is $9.81B (large cap).

Earnings per share are positive, but have been volatile. I think that the share price will reach $52.32 in about five years. This would represent an annual compound growth rate of -4.32% per year, plus and annual dividend of 1.77% dividend yield per year. Over a 5-year time frame, that’s -2.55% CAGR. This looks more like a gamble than an investment.

Tahoe Resources

Symbol: THO on the TSX. The price at Monday close was $10.68, which is near the 52-week low of $9.66 (undervalued). (Chart.) Yesterday’s closing price was $10.68. This is -11.00% lower than last week’s price ($12.00), and -11.30% lower than last month’s price ($12.04), and -35.31% lower than the price one year ago ($16.51). The current yield is 3.17%, which is above the 10 year average of 0.04% (undervalued). The P/E ratio is 41.07, whereas the 10 year average is negative. The Price/Book ratio is 1.36, below the 10 year average of 3.22 (undervalued). Market capitalization is $2.27B (mid cap).

Earnings per share are positive for the first time in five years. As such, it’s impossible to guess where the earnings or price might go from here. The best guess might be the 52-week high, which was $19.45. This is another gamble.

Silver Wheaton

Symbol: SLW on the TSX. The price at Monday close was $16.11, which is near the 52-week low of $14.62 (undervalued). (Chart.) The price is 1.00% higher than last week’s price ($15.95), and -9.09% lower than last month’s price ($17.72), and -40.02% lower than the price one year ago ($26.86). The current yield is 1.65%, which is above the 10 year average of 0.57% (undervalued). The P/E ratio is 101.95, above the 10 year average of 31.33 (overvalued). The Price/Book ratio is 1.50, below the 10 year average of 3.70 (undervalued). Market capitalization is $6.34B (large cap).

Earnings per share are positive and have been rising steadily. I think that the share price will reach $26.48 in about five years. This would represent an annual compound growth rate of 10.45% per year, plus and annual dividend of 1.65% dividend yield per year. Over a 5-year time frame, that’s 12.10% CAGR.

Diversified or Other

Agrium

Symbol: AGU on the TSX. The price at Monday close was $120.92, which is near the 52-week low of $114.87 (undervalued). (Chart.) The price is 1.21% higher than last week’s price ($119.48), and -7.18% lower than last month’s price ($130.28), and -11.18% lower than the price one year ago ($136.14). The current yield is 3.93%, which is above the 10 year average of 0.94% (undervalued). The P/E ratio is 21.52, above the 10 year average of 15.61 (overvalued). The Price/Book ratio is 2.78, above the 10 year average of 2.48 (overvalued). Market capitalization is $17.31B (large cap).

Earnings per share are positive and have been rising steadily, but dipped recently. Hence, combined with the high P/E, I don’t have a good guess for a future target. Maybe near the 52-week high of $146.51, but this would be a bit of a gamble.

Potash Corp Of Sask

Symbol: POT on the TSX. The price at Monday close was $23.03, which is near the 52-week low of $21.50 (undervalued). (Chart.) The price is 3.69% higher than last week’s price ($22.21), and -6.38% lower than last month’s price ($24.60), and -50.34% lower than the price one year ago ($46.38). The current yield is 9.15%, which is above the 10 year average of 1.17% (undervalued). The P/E ratio is 13.31, below the 10 year average of 18.21 (undervalued). The Price/Book ratio is 2.24, below the 10 year average of 4.49 (undervalued). Market capitalization is $19.66B (large cap).

Earnings per share are positive and have been rising (unevenly). I think that the share price will reach $34.64 in about five years. This would represent an annual compound growth rate of 8.51% per year, plus and annual dividend of 9.15% dividend yield per year. Over a 5-year time frame, that’s 17.66% CAGR. This is a value stock.

Teck Resources

Symbol: TCK.B on the TSX. The price at Monday close was $4.61, which is near the 52-week low of $3.65 (undervalued). (Chart.) The price is 18.51% higher than last week’s price ($3.89), and -0.65% lower than last month’s price ($4.64), and -76.13% lower than the price one year ago ($19.31). The current yield is 14.48%, which is above the 10 year average of 2.56% (undervalued). The P/E ratio is 7.32, below the 10 year average of 9.21 (undervalued). The Price/Book ratio is 0.16, below the 10 year average of 1.15 (undervalued). Market capitalization is $2.76B (mid cap).

Earnings per share are positive and have been falling steadily. I think that the share price will reach $13.89 in about five years. This would represent an annual compound growth rate of 24.69% per year, plus and annual dividend of 14.48% dividend yield per year. Over a 5-year time frame, that’s 39.17% CAGR. You could consider this deep value.

Labrador Iron Ore Royalty Corp

Symbol: LIF on the TSX. The price at Monday close was $7.20, which is near the 52-week low of $6.85 (undervalued). (Chart.) The price is -10.78% lower than last week’s price ($8.07), and -35.14% lower than last month’s price ($11.10), and -59.60% lower than the price one year ago ($17.82). The current yield is 13.95%, which is above the 10 year average of 1.41% (undervalued). The P/E ratio is 9.25, above the 10 year average of 5.22 (overvalued). The Price/Book ratio is 0.80, below the 10 year average of 5.95 (undervalued). Market capitalization is $515.03M (small cap).

Earnings per share are positive and have been fluctuating. The price has been volatile, so it’s difficult to pick a target. My projections show $12.34, which seems realistic given the 52-week high of $19.12. Along with the dividend (if it can be sustained), this could produce a tidy profit. Another deep value stock.

Hudbay Minerals

Symbol: HBM on the TSX. The price at Monday close was $2.97, which is near the 52-week low of $2.80 (undervalued). (Chart.) The price is -20.59% lower than last week’s price ($3.74), and -39.26% lower than last month’s price ($4.89), and -71.52% lower than the price one year ago ($10.43). The current yield is 0.68%, which is above the 10 year average of 0.56% (undervalued). The P/E ratio is 10.24, below the 10 year average of 16.78 (undervalued). The Price/Book ratio is 0.35, below the 10 year average of 1.27 (undervalued). Market capitalization is $696.28M (small cap).

Earnings per share are positive and very volatile. I think that the share price will reach $9.28 in about five years. I can only guess at a target, but my projection shows $9.28, which is below the 52-week high of $12.61. Another deep value play.

First Quantum Minerals

Symbol: FM on the TSX. The price at Monday close was $3.10, which is near the 52-week low of $2.87 (undervalued). (Chart.) The price is -11.43% lower than last week’s price ($3.50), and -23.08% lower than last month’s price ($4.03), and -77.84% lower than the price one year ago ($13.99). The current yield is 2.14%, which is above the 10 year average of 0.80% (undervalued). The P/E ratio is 2.23, below the 10 year average of 14.62 (undervalued). The Price/Book ratio is 0.23, below the 10 year average of 1.99 (undervalued). Market capitalization is $2.03B (mid cap).

Earnings per share are positive and have been rising. My projections show a target of $15.35, which seems realistic given the 52-week high of $19.83. Along with the dividend (which appears dependable), this could produce a tidy profit. Another deep value stock.

Conclusion

Materials stocks are out of favour right now. The golds look set to gain in the short-term, but over the longer term I would expect a recovery to benefit the diversifieds. I really like the fact that some of these are trading at a big discount to their book value, without being overwhelmed by debt. If I were to choose a couple, I’d pick Potash, Labrador, HudBay and First Quantum.

Comparing Mining and Materials Stocks

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