Can someone more knowledgeable than I, Perhaps enlighten me on this: Implats has a profile media buy recommendation, in spite of a dividend yield of zero, and a P/E of more than six hundred. How can this be?
because the consensus is that IMP is a buy. That merely means that of those asked the majority think it will be higher in 12 months. Question is how many think that, will they be right? More importantly, there are bunches of people who think IMP is a buy, otherwise there would be no buyers and the stock would be at zero
Did I understand you correctly, Simon? The P/E is >600 and consensus is a buy? If this is the case, I think I will strictly stick to technical analysis from now on, I will never understand the fundamental stuff.
that probably a mistake....see under Peer Analysis, current PE actually 18.9 for earnings of 329c and price of 6225. The one yaer forecast is about 6PE. Comes out better than Amplats at 13PE and Northam at 32PE. So based on PE its the cheapest, hence a BUY.
Thanks for all the helpful answers. I have learned that it will be the safest for me to stick to trading the price. I do not have the expertise to spot obvious mistakes in financial reports, and that could be costly.
you can't use PE to evaluate a mine - DCF is a more reliable measure - or ROE. Mines are capital intensive - and the capital deployed has a fixed return. You dig a hole, prop it up, aircon it, nice fancy elevator, house for the miners, conveyer belt to get the 6bn tons of rock from the hole to the crusher, another conveyer belt to get the 5.999999995bn tons of crushed rock back from the crusher to the dump, (although that is already a sunk cost), bribes, mineral rights, guestimates as to how much platinum is actually in the rock, your hefty eskom bill, plus the new capital that will be required because Eskom doesn't actually have anything to sell you anymore, less the stuff(in Impala's case) that uncle Bob next door is continually threatening to nationalise (oh wait, that is actually brother JuJu), etcetera etcetera. Then you guess how long the shaft will last and you get x number of years at yield Y. There you have to build another shaft. Trick is to figure out expected yield, less costs, times prevailing platinum price * rand / dollar to get free cash flow - which can then be compared to your capital employed (minus the ton of pref shares, loans and other borrowings that will have precedence to your measly 10k) - and you will soon realise that PE has nothing to do with it.
Massive new developments in Malaysia / Indonesia / Papua ,etc ....easy extraction....low cost...low regulation....all biting into Aussie market ! Say no more on how this will effect us ! Labour cheap and CEO's not paid outrageous sums! Government takes little trouble.....