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If you’re interested in investing in gold and other metal industries, the following list of 15 undervalued metal commodity companies might be a good place to start.

To create this list of undervalued stocks we compared levered free cash flow to enterprise value (i.e. the LFCF/EV ratio). Enterprise Value (EV) is the hypothetical cost of purchase for a company, while levered free cash flow (LFCF) is the amount of cash available to stockholders after interest payments on debts are made.

Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the top six stocks mentioned below. Analyst ratings sourced from Zacks Investment Research.


Do you think these companies are undervalued? Use the following information as a starting point for your own analysis.

1. Ternium S.A. (NYSE:TX): Steel & Iron Industry. Market cap of $6.23B. Levered Free Cash Flow at 954.61M, vs. Enterprise Value at 5.20B (implies a LFCF/EV ratio at 18.36%). This is a risky stock that is significantly more volatile than the overall market (beta = 2.21). The stock has lost 5.47% over the last year.

2. Hecla Mining Co. (NYSE:HL): Silver Industry. Market cap of $2.37B. Levered Free Cash Flow at 208.50M, vs. Enterprise Value at 2.06B (implies a LFCF/EV ratio at 10.12%). This is a risky stock that is significantly more volatile than the overall market (beta = 2.11). The stock has had a couple of great days, gaining 6.39% over the last week.

3. Rio Tinto plc (NYSE:RIO): Industrial Metals & Minerals Industry. Market cap of $135.82B. Levered Free Cash Flow at 11.88B, vs. Enterprise Value at 140.48B (implies a LFCF/EV ratio at 8.46%). The stock has had a couple of great days, gaining 6.97% over the last week.

4. Newmont Mining Corp. (NYSE:NEM): Gold Industry. Market cap of $27.89B. Levered Free Cash Flow at 2.16B, vs. Enterprise Value at 27.60B (implies a LFCF/EV ratio at 7.83%). The stock has gained 4.53% over the last year.

5. Cloud Peak Energy Inc. (NYSE:CLD):
Industrial Metals & Minerals Industry. Market cap of $1.29B. Levered Free Cash Flow at 121.21M, vs. Enterprise Value at 1.57B (implies a LFCF/EV ratio at 7.72%). The stock has gained 50.53% over the last year.

6. Golden Star Resources, Ltd. (NYSEMKT:GSS): Gold Industry. Market cap of $690.22M. Levered Free Cash Flow at 48.50M, vs. Enterprise Value at 670.71M (implies a LFCF/EV ratio at 7.23%). The stock has performed poorly over the last month, losing 17.85%.

7. Century Aluminum Co. (NASDAQ:CENX): Aluminum Industry. Market cap of $1.50B. Levered Free Cash Flow at 102.60M, vs. Enterprise Value at 1.49B (implies a LFCF/EV ratio at 6.89%). This is a risky stock that is significantly more volatile than the overall market (beta = 3.46). The stock has had a couple of great days, gaining 6.32% over the last week. The stock has performed poorly over the last month, losing 19.22%.

8. Cliffs Natural Resources Inc. (NYSE:CLF):
Industrial Metals & Minerals Industry. Market cap of $12.30B. Levered Free Cash Flow at 843.47M, vs. Enterprise Value at 12.50B (implies a LFCF/EV ratio at 6.75%). This is a risky stock that is significantly more volatile than the overall market (beta = 2.36). The stock has had a couple of great days, gaining 7.44% over the last week.

9. Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX): Copper Industry. Market cap of $48.92B. Levered Free Cash Flow at 3.57B, vs. Enterprise Value at 53.64B (implies a LFCF/EV ratio at 6.66%). The stock has had a couple of great days, gaining 8.9% over the last week.

10. Denison Mines Corp. (NYSEMKT:DNN): Industrial Metals & Minerals Industry. Market cap of $880.87M. Levered Free Cash Flow at 49.43M, vs. Enterprise Value at 749.39M (implies a LFCF/EV ratio at 6.6%). This is a risky stock that is significantly more volatile than the overall market (beta = 2.82). The stock has had a couple of great days, gaining 13.93% over the last week.

11. Harsco Corporation (NYSE:HSC): Steel & Iron Industry. Market cap of $2.70B. Levered Free Cash Flow at 228.86M, vs. Enterprise Value at 3.48B (implies a LFCF/EV ratio at 6.58%). The stock has gained 31.0% over the last year.

12. Alpha Natural Resources, Inc. (NYSE:ANR): Industrial Metals & Minerals Industry. Market cap of $6.62B. Levered Free Cash Flow at 395.27M, vs. Enterprise Value at 6.36B (implies a LFCF/EV ratio at 6.21%). The stock is a short squeeze candidate, with a short float at 25.38% (equivalent to 5.02 days of average volume). The stock has had a couple of great days, gaining 8.97% over the last week.

13. Southern Copper Corp. (NYSE:SCCO): Copper Industry. Market cap of $29.38B. Levered Free Cash Flow at 1.67B, vs. Enterprise Value at 31.58B (implies a LFCF/EV ratio at 5.29%). The stock has gained 30.07% over the last year.

14. Teck Resources Limited (NYSE:TCK): Industrial Metals & Minerals Industry. Market cap of $31.06B. Levered Free Cash Flow at 1.81B, vs. Enterprise Value at 34.33B (implies a LFCF/EV ratio at 5.27%). This is a risky stock that is significantly more volatile than the overall market (beta = 3.46). The stock has had a couple of great days, gaining 9.73% over the last week.

15. BHP Billiton plc (NYSE:BBL): Industrial Metals & Minerals Industry. Market cap of $220.61B. Levered Free Cash Flow at 11.37B, vs. Enterprise Value at 217.37B (implies a LFCF/EV ratio at 5.23%). The stock has had a couple of great days, gaining 6.63% over the last week.

*Levered free cash flows and enterprise values sourced from Yahoo Finance, rest of data sourced from Finviz.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Source: 15 Metal Commodity Stocks Undervalued by Enterprise Value