Q: Can I get your take on Amerigo? I am thinking they might start getting more credit for their more recent focus on share holder returns (buy backs, divy, and special divies) all while paying down debt (forecast zero by year end). What do you think of the valuation at this current copper price and outlook? Thanks
5i Research Answer:
We think ARG is doing the right things. Debt was an issue in prior cycles, and it has cut/eliminated its dividend in the past. Now, it is in strong financial shape and very cheap at 8X earnings. It has been cash flow positive since 2015. It only has one (sponsored) analyst, but should grow EPS by 10%+ this year. Insiders own 13% and have been small buyers in the past six months. The stock is cheap, but so is the sector. New growth concerns have emerged. Still, the stock is up 15% YTD and 52% in a year. Its small size is still a risk, but for those looking beyond the current cycle it looks good, especially now that the balance sheet has been taken care of.