|Name of Company||Country of Origin/ Exchange Traded||Sector||Stock Price|
|Basic Materials – Metals & Mining – Industrial Metals & Minerals||AUD3.63|
|@ 15 Jul 2018|
|COMPANY PROFILE||South32 Ltd is a metals and mining company. It has a portfolio of assets producing alumina, coal, manganese, nickel, silver, lead and zinc. The business activity is functioned through the region of Australia, South America, and Southern Africa.
South32 was born of the demerger of noncore assets from BHP Billiton in 2015. South32 comprises BHP Billiton’s former aluminium and manganese businesses and the South African energy coal and New South Wales metallurgical coal businesses. It also owns the Cannington silver/lead/zinc mine in northwest Queensland and the Cerro Matoso nickel mine in Colombia. Cannington silver mine and manganese operations deliver high returns but have relatively short reserve life.
|Stock Valuation Below|
|Price to Cash Flow is an alternative method to value shares. This is because accounting profits can be subject to manipulation. Therefore, some investors prefer to value a company based on cash flows generated by the operating activities of the company. It also acts as a reality check to valuation measures such as Price to Earnings and Price to Sales. If a company generates high profits and sales but not operating cash flows, it could be heading for trouble because it is cash that pays the operating expenses. However, the Price to Cash Flow ratio of most firms are volatile and should not be used in isolation to determine the valuation of the stock.|
|At the price of AUD3.63 as at 15 Jul 2018, South32 Ltd is trading at a Price to Cash Flow Ratio of 8.1 times last 12 months cash flow. This is a 25.0% premium to its historical average Price to Cash Flow Ratio of 6.5 times.|
|Is the stock overvalued? One should not just look at one indicator to determine the fair value of a stock.|
|To find out more about our valuation methodology, click here.|
|Source of Data: Charts are from ProThinker Stock Report. Company description, historical financial statements data and price data are from gurufocus.com. Estimates are from gurufocus and/or 4-traders.com – Thomson Reuters.|