Summary
- South32 achieved solid earnings growth in the most recent fiscal year, but I think this has already been factored into the stock's valuations.
- Investors should watch out for commodity mix optimization and higher-than-expected capital returns as the two key potential re-rating catalysts for the stock.
- South32 trades at consensus forward FY 2022 P/E and EV/EBITDA multiples of 10.6 times and 4.9 times, respectively.
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Elevator Pitch
I continue to have a Neutral rating for South32 Limited (OTCPK:SOUHY) [S32:AU].
This article provides an update of my earlier May 21, 2021 write-up on the company. In the four months following my initiation article on South32, its shares rose by +20% from A$2.84 as of May 20, 2021 to A$3.42 as of September 10, 2021. South32's FY 2021 financial results were good, but lackluster production volume growth expectations for fiscal 2022 is expected to lead to slower growth for the company going forward.
It is noteworthy that although South32 is the most expensive stock among its diversified mining company peers based on the forward P/E valuation metric, its consensus current fiscal year ROA (Return on Asset) is lower than that for two of the company's peers. On the other hand, South32 could potentially warrant a further re-rating in the future, if and when its capital return and commodity mix optimization catalysts are realized. As...
Read Full Story: https://seekingalpha.com/article/4455061-south32-good-full-year-results-priced-in
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