ArcPacific Resources Corp (TSXV:ACP) And The Basic Materials Industry Prospect For 2017
ArcPacific Resources Corp (TSXV:ACP), a CADCA$455.73K small-cap, operates in the basic materials industry which is sensitive to changes in the business cycle, as it supplies materials for construction activities. Basic material analysts are forecasting for the entire industry, a strong double-digit growth of 25.66% in the upcoming year , and a whopping growth of 64.14% over the next couple of years. This rate is larger than the growth rate of the Canadian stock market as a whole. Today, I will analyse the industry outlook, and also determine whether ACP is a laggard or leader relative to its basic materials sector peers. View our latest analysis for ArcPacific Resources
What’s the catalyst for ACP’s sector growth?
Overall, the basic materials sector seems to be predominantly mature in terms of its industry life cycle. Companies appear to be vastly competitive and consolidation seems to be a inevitable. However, the industry is still facing many emerging trends including the reduction of waste, raw material inflation, and innovation in global supply chain management. Over the past year, the industry saw growth of over 50%, beating the Canadian market growth of 8.26%. Given the lack of analyst consensus in ACP’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 Canadian stock market.
Is ACP and the sector relatively cheap?
The metals and mining sector’s PE is currently hovering around 11x, below the broader Canadian stock market PE of 17x. This means the industry, on average, is relatively undervalued compared to the wider market – a potential mispricing opportunity here! Though, the industry returned a similar 8.60% on equities compared to the market’s 9.62%. On the stock-level, ACP is trading at a PE ratio of 7x, which is relatively in-line with the average metals and mining stock.
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. Furthermore, the sector is trading at a discount to the market, providing an opportune time to accumulate more shares in metals and mining.
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. Given the high growth prospects, as well as the lower PE relative to the broader market, there is plenty of opportunity to profit from growth in addition to undervaluation.
For a deeper dive into ArcPacific Resources’s stock, take a look at the company’s latest free analysis report to find out more on its financial health and other fundamentals. Interested in other basic materials stocks instead? Use our free playform to see my list of over 2000 other basic materials companies trading on the market.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.
