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@ROCKETV1 Agreed, there is no way the FED can increase interest rates by anything other than
a nominal amount. Cost of servicing current borrowing would be unmanageable
with higher rates.
So there will be higher inflation [in short term at least] and further recourse to the
printing press, thus increasing money supply. Not sure where the repeat process
will end but surely the market will have to continue with dollar devaluation.
Good for gold prospects imv---watch out for quick reversal of pricing in 2022.
Good post all. Compared with it’s competitors: It has a proven management team, good resources and is on track to deliver higher growth. It’s use of alternative energy to aid its production and reduce costs is inspired. At first glance it appeared to be undervalued and having checked my figures twice it does appears to be extremely undervalued or is this just conformation bias?
Thoughts are to keep buying in this one if you are able to and hold. Gold is suffering because of the mixed market feelings from the FED. All expect tapering soon and interest rates to go higher after inflation Worldwide. If you think that the FED has it all sorted, then join the ship of fools because they dont have any other options than to keep printing more money. This is unsustainable and the end results are inevitable regardless of how high the dollar is rated at present. Rant over, i will be buying more in PAF as price slips and holding.
Are PAF and the gold miners now the ugly ducklings of the LSE ?
Less than 16p, PE under 5, net dividend yield after tax of 4.9% for UK holders, more if your in SA,
Mintails in the works,
Debt now at such low levels the Solar Farm and blueberry profits could take care of it,
USD/ZAR rate back above 15,
Prospective bumper earnings forecast for 2022,
Buyback to happen,
Yet here we are, in the doldrums at 15.4p.
IMO the results and the exchange rates would leave us resting above 18p with a gold price above $1700, which is bizarrely under attack despite inflation being a buzz word. I am now overweight here.
Now the strategy is sit tight and use a DRIP at Xmas, or wait for the oil company hype to die down.
Thoughts ...
There are many penny stocks out there today with a lot of growth potential. There are even some, like Pan African Resources (LSE: PAF), that I feel combine significant growth potential with dividend income. To me, that’s quite a potent mix. I even think the shares could more than double from their current share price, which is just around 16p each at the time of writing. So I’m very likely to buy the shares.
Why I think this penny stock’s price could double
Taking a price to earnings (P/E) ratio of eight, which would still make the shares ‘cheap’ by conventional standards, and then taking the estimated earnings per share for 2022 of 5.18p, I calculate we can get a target share price of 41.5p (that is, eight times the EPS), or thereabouts. The estimated earnings per share figure comes from analysts at Edison. Incidentally, they value the shares more conservatively at around 28.04p. Even on that more conservative target price, there’s still potential for the stock to almost double in value.
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Admittedly my calculations are for a best-case scenario as they would require the share price to hit an all high time – and by quite some margin. But here’s why I think the shares could possibly re-rate and achieve a higher valuation.
Getting more value and a higher share price
Edison predicts that PAF’s revenue will go from US$218.8m in 2018 up to $340.9m in 2022. Profit before tax over the same period should grow from $37.1m to $144m. This performance should in itself lead to a higher valuation than Pan African Resources currently has.
While UK miners generally have low P/E ratios right now, that’s not the same for overseas-listed gold miners. Barrick Gold has a P/E of around 13. I feel that puts Pan African Resources’ low P/E, which is currently four, into perspective. Newmont, listed in the US, has an even higher rating at 15. Even UK-listed Centamin has a forward P/E of 10. Going back to my share price target, I think this shows a P/E of eight is realistic.
In recent results for its financial year ended 30 June, Pan African Resources reported a 12% increase in gold production to 201,777 ounces. That followed 179,600 ounces of gold mined in 2020. So the direction of travel is good and it’s operating well.
Falling debt at the firm should also help boost the future earnings per share as less revenue goes towards debt repayment.
Of course, things may not turn out the way I hope or analysts expect if the gold price falls. It’s worth me keeping an eye on that. But gold is often seen as an inflation hedge (that is, a good investment when inflation is rising), so my bet is on gold prices rising and demand in