Amani Gold Limited (ASX:ANL), a AUDA$34.46M small-cap, is a metals and mining operating in an industry which can be affected by shifts in the housing market, as many produced raw materials are components of construction projects. Basic material analysts are forecasting for the entire industry, a positive double-digit growth of 26.31% in the upcoming year , and a massive growth of 45.17% over the next couple of years. This rate is larger than the growth rate of the Australian stock market as a whole. In this article, I’ll take you through the sector growth expectations, and also determine whether Amani Gold is a laggard or leader relative to its basic materials sector peers. See our latest analysis for Amani Gold
What’s the catalyst for Amani Gold’s sector growth?
Overall, the basic materials sector seems like it has reached maturity in its life cycle. Companies appear to be vastly competitive and consolidation seems to be a natural trend. There are plenty of emerging trends to deal with across the board including the reduction of waste, raw material inflation, and innovation in global supply chain management. In the previous year, the industry saw growth of 7.36%, beating the Australian market growth of 6.88%. Given the lack of analyst consensus in Amani Gold’s outlook, we could potentially assume the stock’s growth rate broadly follows its metals and mining industry peers. This means it is an attractive growth stock relative to the wider Australian stock market.
Is Amani Gold and the sector relatively cheap?
The metals and mining industry is trading at a PE ratio of 16x, in-line with the Australian stock market PE of 18x. This illustrates a fairly valued sector relative to the rest of the market, indicating low mispricing opportunities. Furthermore, the industry returned a similar 10.35% on equities compared to the market’s 11.86%. On the stock-level, Amani Gold is trading at a higher PE ratio of 112x, making it more expensive than the average metals and mining stock. In terms of returns, Amani Gold generated 1.23% in the past year, which is 9% below the metals and mining sector.
What this means for you:
Are you a shareholder? Metals and mining stocks are currently expected to grow faster than the average stock on the index. This means if you’re overweight in this sector, your portfolio will be tilted towards high-growth. The industry is trading relatively in-line with the market, which means you may be paying a fair value for the materials stocks should you wish to accumulate more of your holdings.
Are you a potential investor? If you’ve been keeping an eye on the metals and mining sector, now is the right time to dive deeper into the stock-level. The high growth prospect makes stocks such as Amani Gold a more appealing investment case, though the industry is trading relatively in-line with the rest of the wider marker. I suggest you examine the stock’s fundamentals, such as its financial health, before you make an investment decision.