We recently compiled a list of the 7 Best Canadian Stocks Under $20. In this article, we are going to take a look at where Hudbay Minerals Inc. (NYSE:HBM) stands against the other Canadian stocks under $20.
What’s Happening in the Canadian Stock Market?
The Canadian economy is beginning to settle down as inflation is on a steady downward trend and the Bank of Canada has also taken an easier policy stance, thereby paving the way for stronger economic growth moving forward. On July 19, Reuters reported that the Bank of Canada cut its overnight interest rates by 25 basis points to 4.5% based on the expectation that inflation will continue to fall.
Inflation rates in Canada cooled a little more than expected making interest rate cuts more likely. On July 16, as per Reuters, June 2024 Consumer Price Index (CPI) cooled down to 2.7% a 0.1% decrease month-over-month thereby paving the way for an interest rate cut.
As a result of the interest rate cut, the Canadian stock market was seen performing better. On August 16, Reuters reported that the Canadian stock index ended higher on Friday and witnessed its biggest weekly advance of the year. Investors globally have been cheering the recent signs of the US economic resilience and the recent record high gold prices also boosted the mining sector
The S&P/TSK composite index ended up 0.1% at 23,054.61, posting a seven-day gain streak, recorded as the longest daily winning streak since April 2023.
Looking at a sectoral analysis, the materials group that comprises metal minerals and fertilizer companies was up 1.5% as the price of gold went up by 2% to an all-time high. Moreover, the financial market, which contributed 29% to TSK weighting, grew by 0.6%. The energy sector was a drag, however, and fell 1.1% due to lower oil prices, which settled at $76.65 1.9% lower than expected. The weaker price of oil was mainly attributed to slower demand from China.
On August 13, Ross Healy, chairman of Strategic Analysis Corporation and portfolio manager at MacNicol & Associates Asset Management, appeared on Bloomberg to discuss the performance of TSK and the US stock market. Ross Healy, mentioned that the Canadian stock market is trading at 1.5 times its adjusted book value, whereas the NASDAQ is trading at 9.5 times its book value. Mentioning these numbers Ross Healy, stated that for investors looking to invest for 5 years or longer, the Canadian stock market looks more lucrative due to its potential for growth and the portfolio of stocks it has to offer.
Ross Healy, further believes that we have had a long US advantage and now the market is heading towards a Canadian advantage. Moreover, the precious metal and gold options in the TSK index make the market poised for growth in the long term. Ross Healy, while stating his bull case for gold companies mentioned that companies that have good money on their balance sheets and have been able to find underdeveloped projects to work on have been successful when compared to their competitors.
Our Methodology
To compile the list of 7 best Canadian stocks under $20 we used the Finviz screener. We used the screener to filter out Canadian Stocks that were trading under $20 and sorted them by their market capitalization to get a consolidated list of stocks. Next, we ranked these stocks based on the average price target upside as per Wall Street analysts. The stocks are ranked in ascending order of the average price target upside, as of August 18. Moreover, we have also mentioned the share price of each stock as of August 18, 2024.
At Insider Monkey we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
An aerial view of a copper mine, showing the intricate workings of heavy machinery.
Hudbay Minerals Inc. (NYSE:HBM)
Average Price Target Upside as of August 18: 47.84%
Share Price as of August 18: $7.73
Hudbay Minerals Inc. (NYSE:HBM) operates as a mining company in North and South America. The company mainly focuses on the exploration, development, and mining of different materials. It operates through three main business segments: Copper Production, Zinc Production, and Gold and Silver Production.
Hudbay Minerals Inc. (NYSE:HBM) acts as a raw material provider for numerous industries including renewable energy technologies, electronics, and construction materials. The company has mines in important geographical locations including Peru, Manitoba, and British Columbia, and sells its products to the international market and global manufacturers.
The company posted a robust second quarter of 2024, despite facing production challenges. During the second quarter, Hudbay Minerals Inc. (NYSE:HBM) produced 28.6-kilo tons of copper, 58.6 kilo ounces of gold, 738.7 kilo ounces of Silver, and 8.1 kilo tons of Zinc. All the segments showed considerable improvement from a year ago except for Zinc, which decreased 7.95% year-over-year. However, the production of copper increased by 31.8%, gold increased by 33.1%, and silver improved by 20.6% year-over-year.
This strong production growth resulted in the company making $425.52 million in revenue up 36.31% year-over-year. While the revenue generation capacity of the company is impressive, what’s more notable is its cash-making ability. Hudbay Minerals Inc. (NYSE:HBM) generated $30 million in free cash flow and continued its trend of positive cash flow over the last 12 months. As a result, the company ended the quarter on a strong financial footing with more than $524 million in cash and cash equivalents.
Should you invest in Hudbay Minerals Inc. (NYSE:HBM)?
Hudbay Minerals Inc. (NYSE:HBM) can be a good investment stating the company has grown its revenue by 16% during the past 10 years. Moreover, the company is on track to achieve its production targets for the year and has also achieved new milestones in terms of improving its consolidated cash cost. For instance, the cash cost improved to $1.14 per pound of copper during the quarter, leading to an improvement in cash cost guidance to a range of $0.90 to $1.10 per pound.
HBM is cheap at current levels, it is trading at 14 times its forward earnings, which is an 11% discount to its sector. 14 analysts have a Strong Buy rating on the stock, with their 12-month median price target of $11.43 presenting an upside of 47.84%% from the current level.
L1 Long Short Fund stated the following regarding Hudbay Minerals Inc. (NYSE:HBM) in its Q2 2024 investor letter:
“Hudbay Minerals Inc. (NYSE:HBM) (Long +31%) shares rallied over the quarter driven by rising copper and gold prices, as well as strong production results. The company’s first quarter results showed higher gold production and robust operating performance at both its major assets, which exceeded consensus expectations. In addition, the company announced a ~US$400m equity raise to support balance sheet de-leveraging and fund its key growth projects. Hudbay is a mid-tier mining company primarily producing copper, alongside gold and zinc, with its key assets located in Canada and Peru. We are attracted to Hudbay due to our positive medium-term outlook for copper and the company’s strong near-term free cash flow generation. This cash generation potential will allow the company to de-lever and recycle capital back into its highly prospective exploration program and major growth projects, most notably its Copper World project in Arizona.”
Overall HBM ranks 2nd on our list of the best Canadian stocks under $20. While we acknowledge the potential of HBM as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than HBM but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.