Teck Resources Limited (NYSE: TECK) is a leading Canadian mining company focused on copper, zinc, and steelmaking coal, which are vital for a low-carbon transition. Headquartered in Vancouver, its shares are listed on both the Toronto and New York Stock Exchanges.
Keevil on Recent Glencore Bid
Glencore recently made a bid for Teck Resources, but Chairman Emeritus, Dr. Norman B. Keevil, issued a statement addressing his views on the company's future.
Keevil and his colleagues are proud of their accomplishments in building Teck over 30 years, growing the company 500-fold from a $25 million market cap to $12.6 billion, with double-digit compounded growth in shareholder value and a recent increase to $25 billion.
They are confident that Jonathan Price and his team have the potential to replicate, or even surpass, this strong growth phase. Teck currently possesses producing assets, promising development projects in copper and other significant metals, skilled personnel, financial strength, and a clear focus.
Numerous mining industry players are closely watching Teck, with interest in partnering or investing in Teck Metals following the separation of its base metals and steelmaking coal businesses.
They would support a transaction - be it an operating partnership, merger, acquisition, or sale - with the appropriate partner and terms for Teck Metals after the separation. Based on their decades of experience in building a successful mining company, they believe that pursuing a sale or merger transaction now would deprive shareholders of considerable post-separation value.
Keevil also mentioned his book, Never Rest on Your Ores, which provides insight into Teck's history and growth.
Glencore Ready to Up Bid
Glencore is willing to enhance its $23bn bid for Teck Resources if the Canadian miner agrees to negotiations. Teck has consistently rejected Glencore's advances, preferring to proceed with its own plan to split into a coal company and a metals business. Shareholders will vote on April 26 on whether to support the split, with the decision increasingly seen as a referendum on Glencore's takeover bid. Glencore plans to split the combined company in two if it acquires Teck, creating a large coal company listed in New York and a separate metals company headquartered in Canada.
Teck Stock Performance
Teck Resources' share price is trading at $48.10 as of 19 Apr 2023 and is up by 31% year-to-date (YTD). On an annual basis, the stock is up by 11%, whilst the S&P 500 is up by 6%, which means the stock has performed better than the broader market by approximately 5% over this period.
Is Teck Resources Ltd Class B a long-term investment opportunity? Let’s take a closer look at the company's fundamentals to find out.
Why is fundamental analysis important?
Fundamentals are a set of key metrics that, when looked at holistically, can tell us whether or not a company is likely to be a good investment over the long term. Investors have relied on fundamental analysis for decades to assess the financial health of an organization as well as its growth prospects.
On balance, stock prices are usually driven by a company’s financial performance over the long term, and it makes sense to analyze a company’s fundamentals in detail before deciding to invest.
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), price-to-sales ratio (P/S ratio), earnings-per-share (EPS) and debt.
What do Teck Resources Ltd Class B’s fundamentals tell us about the investment opportunity? Let's have a look.
TECK stock fundamental analysis
A good place to start is to look at Teck Resources Ltd Class B's EPS, which will tell us how profitable the company is on a 'per share' basis. This metric is calculated by taking a company's net income (after dividends on preferred stock) and dividing this by the number of outstanding shares.
Based on its most recent financials, Teck Resources Ltd Class B's EPS is 4.75, and this climbed by 12% 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 may be considered expensive in relation to its earnings, and a lower ratio indicates it might offer more value.
TECK has a P/E ratio of 10.2, based on its last reported financial data. This is 10% higher than the average P/E ratio across the industry benchmark (which is 9.3).
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. The consensus opinion is that stocks with a lower P/S ratio offer better value, and stocks with a very low P/S ratio are known as 'value stocks'. However, what is considered a 'high' or 'low' P/S Ratio is relative and can vary across different sectors, so the best way to objectively assess this is to compare a company against its industry peers.
Teck Resources Ltd Class B's P/S ratio is currently 2. This matches the sector-wide average. This indicates that the stock’s value may be on par with other companies in the same sector.
Next, let's look at Teck Resources Ltd Class B's price to book value (P/BV), which tells us how much investors are willing to pay for a company's assets. P/BV is used by value investors to identify potential investments and 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').
According to its last reported filings, Teck Resources Ltd Class B's P/BV is 1.3, and this matches the average across the industry, which is 1.3.
Finally, when analyzing an investment opportunity, you should always take a look at how much debt a company has on its books, as this can help you assess how risky it is as an investment. Carrying a large amount of debt can be a red flag if the company is not generating enough free cash flow to service the debt.
According to its most recent financial statements, Teck Resources Ltd Class B has total debt of $7.39bn. The company also has cash & short-term investments totaling $1.39bn, giving it a 'net debt' of $6bn.
Based on these figures, Teck Resources Ltd Class B's 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 Teck Resources Ltd Class B A Buy?
All in all, when we looked at the underlying trends at Teck Resources Ltd Class B, we found that they paint a mixed picture in terms of the company's long-term outlook.
To be more specific, the stock is up by 31% YTD and up by 11% over the past year.
In summary, there isn't enough for us to say that Teck Resources Ltd Class B deserves a place in your portfolio right now, but it's worth keeping an eye on.
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.
Check out our recent analysis on Ero Copper Corp and Southern Copper Corp.
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.