Marlin Gold Mining Ltd (TSXV:MLN), a metals and mining company based in Canada, received a lot of attention from a substantial price increase on the TSXV in the over the last few months. Less-covered, small caps tend to present more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Let’s examine Marlin Gold Mining’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
Is Marlin Gold Mining still cheap?
Marlin Gold Mining is currently overpriced based on my relative valuation model. I’ve used the price-to-book ratio in this instance because there’s not enough visibility to forecast its cash flows, and its earnings don’t seem to reflect its true value. The stock’s ratio of 8.98x is currently well-above the industry average of 1.08x, meaning that it is trading at a more expensive price relative to its peers. If you like the stock, you may want to keep an eye out for a potential price decline in the future. Given that Marlin Gold Mining’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.
What kind of growth will Marlin Gold Mining generate?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. With revenues expected to grow by a double-digit 15.71% in the upcoming year, the outlook is positive for Marlin Gold Mining. If the level of expenses is able to be maintained, it looks like higher cash flows is on the cards for the stock, which should feed into a higher share valuation.
What this means for you:
Are you a shareholder? It seems like the market has well and truly priced in Marlin Gold Mining’s positive outlook, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe Marlin Gold Mining should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping tabs on Marlin Gold Mining for some time, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the optimistic prospect is encouraging for Marlin Gold Mining, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Marlin Gold Mining.
Marlin Gold Mining Stock Price, News & Analysis provided by Simply Wall St.