It has been an interesting week for First Quantum Minerals (TSX:FM). The company has been on somewhat of a roller coaster ride since the 19th of September when it saw a single day increase of over 10%. The stock finished off last week strong, going from the mid $10 range to nearly $13 a share.
Today was quite the opposite. The stock suffered the biggest single day loss on the TSX today, in the red by 10.53%. What is all the noise about? Well, it all started with a simple rumor.
Rumors of a predatory takeover bid spiked First Quantum’s price
First Quantum has lost over half of its stock value in the last half decade, and as such was supposedly drawing what the company deemed “predatory interest” from global miners. The company currently operates the largest copper mine in Africa, and trading at less than half of its $23.05 high in 2018, there was definitely the possibility that a global company was willing to pay for its assets.
The company has since denied this, stating:
“First Quantum has not engaged in any discussions regarding a takeover bid or other change of control transaction and has no knowledge of potential takeover bids, change of control transactions or proposals”
After news circulated today that the rumors were false, the company’s stock took a hit.
Is there value in First Quantum today?
Investors tend to look at single day drops like this as a buying opportunity. But the company’s stock price may have simply just fallen back down to earth. First Quantum is still trading at nearly 17 times earnings, and has a 5 year PEG ratio of 1.27, indicating that there may be too much growth priced into this stock already.
The company has posted quarterly revenue growth year over year of -10.50%, and earnings growth is even worse at -42.20%. In terms of a dividend, First Quantum’s is practically non-existent with a yield of only 0.09%.
The company is expected to grow at an annual rate of around 14.5% over the next half decade and a 1 year target price that only signals 15% upside, I’m probably avoiding it. With a 3 month beta of 2.84, the stock is nothing short of volatile.
If you’re looking to invest in the materials sector, you may be wise to look to gold stocks instead. The price of gold has gone up nearly 12% since July 1st, and as fears of a recession continue to spread in the United States, many investors are heading to one of the most popular safe havens in times of economic uncertainty, gold.