Ivanhoe Mines Ltd (TSX: IVN) is a mining development company engaged in the exploration and development of mineral properties. Its projects include the Platreef Project, Kamao-Kakula Project, Western Foreland Exploration Project, and Kipushi Project. The company was founded by Robert Martin Friedland on April 29, 1993, and is headquartered in Vancouver, Canada.
The company's stock is trading at CA$13.03 as of 19 Apr 2023, and year-to-date (YTD), it is up by 19%. Over the past 12 months, the stock is up by 9%, whilst the S&P 500 is up by 6%, which means the stock has performed better than the broader market by approximately 3% over this period.
What do the underlying trends at Ivanhoe Mines Ltd tell us about its potential as a long-term investment? Let’s take a closer look and see what the numbers tell us.
Why Is Fundamental Analysis Important?
To better understand the underlying trends at Ivanhoe Mines Ltd and analyze if the company will be a good 'buy and hold' investment, it’s good to start by getting an overview of the fundamentals.
There are a number of fundamental metrics to analyze, but we'll be focusing on the price-to-earnings ratio (P/E ratio), the price-to-book value (P/BV), earnings per share (EPS) and debt.
What do Ivanhoe Mines Ltd’s fundamentals tell us about the investment opportunity? Let's have a look.
IVN Stock Fundamental Analysis
First of all, let's look at Ivanhoe Mines Ltd's EPS, which indicates how profitable the company is on a 'per share' basis. This metric is calculated as net income (after dividends on preferred stock) divided by the number of outstanding shares.
Based on its most recent financials, Ivanhoe Mines Ltd's EPS is 0.33, and this climbed by 560% year-on-year, which is a positive sign.
Another key metric to look at is the P/E ratio because it immediately tells a potential investor how cheap or expensive the stock is. The ratio tells us how much investors are willing to pay for a company’s earnings, and it is calculated by taking the price of a stock and dividing it by the EPS. A higher ratio suggests that the stock is expensive in relation to its earnings, and a lower ratio indicates it might offer more value.
IVN has a P/E ratio of 29.5, based on its most recent financials. This is 40% higher than the average P/E ratio across the industry benchmark (which is 21.1) and suggests that the stock is expensive in relation to its earnings.
Next, let's look at the P/S ratio, which looks at a company's stock price compared to its sales (revenues). It is calculated as the current price divided by sales for the previous 12 months and is useful because it helps us understand how much investors are willing to pay for every dollar of a company's revenues. This company does not have a P/S ratio. This company does not have a P/S ratio.
Another key metric to look at is a company's price-to-book value (P/BV), which tells us how much investors are willing to pay for a company's assets. It is calculated by the company's stock price divided by its net assets (or 'book value', meaning the value of all assets which appear 'in its book'). P/BV is used by value investors to identify potential investments and a P/BV of 1 is usually considered a solid investment.
Based on figures from its last reported balance sheet, Ivanhoe Mines’ P/BV is 4, and this is 90% higher than the average across the industry, which is 2.1.
Finally, it's always worth looking at a company's debt profile before deciding to invest in order to assess the risk. A high amount of debt can be a problem if a company is not generating enough cash flow to service its debt, and some sectors rely on debt more heavily than others.
Ivanhoe Mines Ltd has total debt of CA$520.58bn as of 19 Apr 2023. Adjusting for CA$597.45bn in cash & short-term investments, the company has a 'net debt' of CA$-76875m.
Based on these figures, Ivanhoe Mines’ current levels of net debt don't worry us, as the company generates enough revenue to service its debt and is not using debt to fund its operations, which is good to see.
Is Ivanhoe Mines Ltd a Good Investment?
All in all, we’ve noticed some encouraging trends at Ivanhoe Mines Ltd. Specifically, the stock is up by 19% YTD and up by 9% over the past year.
In summary, we think the future is bright for Ivanhoe Mines Ltd, and it's certainly worth a closer look.
As with any stock, however, there are additional factors to consider before making an investment decision. This analysis is general in nature and based on historical data, and it does not take into account your specific investment objectives or financial circumstances. Additionally, this article does not look at the macro environment where geopolitical headwinds, internal company changes and individual technicalities in the way a company conducts its business can have a significant impact on a company's long-term outlook. Please do your own due diligence before deciding to invest.
What's Next for Your Investment Portfolio?
Diversifying it with oil and gas stocks could be a strategic move. The industry faces the challenge of finding high-quality oil and gas reserves, which makes investing in exploration and production (E&P) stocks particularly intriguing. To deepen your understanding and expand your investment strategies, consider exploring our investing guides on topics such as buying OTC and TSX stocks, finding investment opportunities, and the benefits of investing in gold.