Can I have your opinion on Amerigo Resources (ARG). Thanks
Dave
ARG is a small-cap mining company that produces copper and is now trading at 21x times' Forward P/E. The company’s growth has been quite cyclical over the years. The balance sheet is currently strong, with a net cash of $13M. Based on consensus estimates, sales are expected to decline by -5% and return to growth of around 18% after that. Growth is expected to be bumpy.
The company recently started to pay dividends (yield around 10%) and repurchase shares (not at a huge scale). It has cancelled dividends in past cycles. The trailing twelve-month cash flow of around $18M currently covers the dividend of around $14.8M annually, but the situation could change going forward given the cyclicality of the business. Overall, and attractive yield, and a strong balance sheet, but the size risk and cyclicality risk need to be considerations.