Tahoe Resources Inc (NYSE: TAHO), a materials company with a market capitalization of $1.5 billion, saw its share price increase by 19.8% over the last month. As a small-cap stock, hardly covered by analysts, there is generally more of an opportunity for mispricing as there is less activity to push the stock closer to fair value. However, could the stock still be trading at a relatively cheap price? Let’s take a look at Tahoe Resources' outlook and value based on its most recent financial data to see if there are any catalysts for a price change.
Is Tahoe Resources Still Cheap?
Value investors should be happy! Tahoe Resources is still a bargain right now. According to the valuation below, the intrinsic value for the stock is $6.80 per share, which is above what the market is valuing the company at the moment. This indicates a potential opportunity to buy low.
| Analysis | Model Fair Value | Upside (Downside) |
|---|---|---|
| 10-yr DCF Revenue Exit | $7.06 | 50.9% |
| 5-yr DCF Revenue Exit | $6.70 | 43.2% |
| Peer Revenue Multiples | $5.87 | 25.5% |
| 10-yr DCF EBITDA Exit | $8.18 | 74.8% |
| 5-yr DCF EBITDA Exit | $8.35 | 78.4% |
| Peer EBITDA Multiples | $6.99 | 49.3% |
| 10-yr DCF Growth Exit | $7.48 | 59.9% |
| 5-yr DCF Growth Exit | $7.32 | 56.4% |
| Peer P/E Multiples | $5.91 | 26.4% |
| Dividend Discount Model | $5.70 | 21.9% |
| Dividend Discount Model (multi-stage) | $4.37 | -6.6% |
| Earnings Power Value | $7.61 | 62.6% |
| Average | $6.80 | 45.2% |
Click on any of the analyses above to view the latest model with real-time data.
Tahoe Resources' share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. If you believe the share price should eventually reach its true value, a low beta could suggest it is unlikely to rapidly do so anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range.
What Does The Future Of Tahoe Resources Look Like?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company’s future expectations.
source: finbox.io data explorer
With Tahoe Resources' relatively muted top-line growth of 2.6% expected over the next five years on average, growth doesn’t seem like a key catalyst for a buying decision. At least not in the short to medium-term, unfortunately.
How This Impacts Investors
Although the company's expected future growth is relatively low, shares of Tahoe Resources still appear to be trading at a steep discount to its intrinsic value. Therefore, it may be a great time to purchase the stock or add more to your holdings.
However, there are also other factors to consider that could explain the current undervaluation. I recommend you continue to research Tahoe Resources to get a more comprehensive view of the company by looking at:
Risk Metrics: how is Tahoe Resources' financial health? Find out by viewing our financial leverage data metric which plots the dollars in total assets for each dollar of common equity over time.
Efficiency Metrics: how much free cash flow does Tahoe Resources generate as a percentage of total sales? Has it been increasing or decreasing over time? Review the firm's free cash flow margin here.
Forecast Metrics: what is Tahoe Resources' projected EBITDA margin? Is the company expected to improve its profitability going forward? Analyze the company's projected EBITDA margin here.
Author: Andy Pai
Expertise: financial modeling, mergers & acquisitions
Andy is also a founder at finbox.io, where he's focused on building tools that make it faster and easier for investors to do investment research. Andy's background is in investment banking where he led the analysis on over 50 board advisory engagements involving mergers and acquisitions, fairness opinions and solvency opinions. Some of his board advisory highlights:
- Sears Holdings Corp.'s $620 mm spin-off via rights offering of Sears Outlet, Hometown Stores and Sears Hardware Stores.
- Cerberus Capital Management's $3.3 bn acquisition of SUPERVALU Inc.'s New Albertsons, Inc. assets.
Andy can be reached at [email protected].
As of this writing, I did not hold a position in any of the aforementioned securities and this is not a buy or sell recommendation on any security mentioned.
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