Commodities are flying across many screens, for traders and investors alike, as volatility seems to be drawn to that tiny - yet essential - pocket of the economy. These volatile periods may stress many participants' profit and loss statements. However, the smart ones will know how to benefit from the chaos.
When these markets begin to pivot, as they are doing today, markets begin to pick their favorite names before letting the cycle run its course. Today, by picking on the breadcrumbs left behind by this 'pick and choose' activity, investors can find the trail to the industry winners and pocket some returns.
Following market favoritism and analyst bullishness via ratings, here are three mining companies that are bound to go flying amid the swings in the price of the very thing they sell, metal commodities.
Not every day do investors get the chance to consider investing in a stock that has declined nearly 50% off its 52-week high; Hecla Mining (NYSE: HL) is one name experiencing such discounts, alongside some seriously optimistic outlooks.
Something is hiding below the hood of this profit machine, as analyst earnings projections are suggesting a 200% increase in 2024 earnings per share. All else equal, the stock price, mainly driven by EPS, should experience a similar rally if these targets prove to be correct.
Going for the safe, conservative bridge to be crossed before potentially reaching the 200% advance in the stock price, Hecla Mining analyst ratings are shooting for a consensus of $6.91 a share price target. Though far from the 200% implied return, this initial target would translate into a near 70% premium from today's prices.
The overall market voting system, the so-called popularity contest, shows that Hecla is winning by a landslide. Compared to similar rivals, like the Canadian firm Avino Silver & Gold Mines (NYSE: ASM), markets are screaming that expected earnings quality and growth are superior.
Basing an opinion on the forward price-to-earnings ratio, where markets look to gauge how much to pay for the next twelve months of earnings, the future looks a lot brighter for Hecla relative to the industry.
Trading at a 29.1x forward P/E will place Hecla Mining above the industry average of 16.3x and significantly above its Canadian competitor's 6.8x multiple. Some value investors may argue that this only makes Hecla the more expensive alternative; however, the beauty lies in the details.
According to the company's investor relations website, Hecla is the U.S.'s primary silver producer and the world's third-largest. This may be why analysts are so bullish and why markets are willing to pay a premium over the industry's average valuation.
Despite skipping on the significant price discount from recent highs, MP Materials (NYSE: MP) is still offering considerable upside to investors considering a potential purchase in this name, starting with the grace of Wall Street analysts.
Currently, MP Materials analyst ratings say there is a consensus price target of $35.33 a share for this name, implying a total advance of nearly 74% from today's low prices. When investors hover over the earnings expectations for 2024, the reasoning behind this sentiment becomes evident.
This company is pregnant with a potential 170% jump in EPS for the next twelve months, which in theory, should translate into a similar increase in the stock's price, just as in Hecla Mining's case. Why is such a strong sentiment going toward this company for the next few months?
During the second quarter of 2023, MP Materials reported pleasant growth in its results. Starting with a record production level in its Stage I upstream projects and significant signs of undervaluation and further value from management.
A total of 15.5 million shares were repurchased during the period, making it clear that insiders see some upside in the stock's future. Following the analyst estimates, and the company's increments in production capacity, there is nothing but rally points in the chart.
Triple Flag Precious Metals
Free cash flow (operating cash flow minus capital expenditures) is the lifeblood of any business. it allows management to reinvest in growth as well as reward shareholders via dividends and buybacks, and Triple Flag Precious Metals (NYSE: TFPM) is going in the right direction when it comes to these funds.
This company posted record free cash flow during the second quarter 2023 period, which can only mean an early Christmas for shareholders. The first portion comes as a 5% increase in the dividend payout, a reward to loyal shareholders, followed by the repurchase of 341 thousand shares during the same period.
The upside doesn't end there however, as Triple Flag analyst ratings are shaking hands on a consensus price target of $16 a share, implying yet another double-digit potential return for these sector names. Of course, money follows growth, which is why earnings expectations for 2024 matter so much.
While not as high as its peers, a 45% expected growth for EPS in the next twelve months places this name at the top of the ranks relative to the industry.
The common thread is massive bullish views from analysts, optimistic management buying back shares, and a thirst for new breakouts across all charts. Any takers for a double-digit upside?