Antofagasta plc isn’t the only FTSE 100 growth stock I’d buy today

G A Chester discusses the valuation and prospects of Antofagasta plc (LON:ANTO) and another FTSE 100 (INDEXFTSE:UKX) growth stock.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Copper mining giant Antofagasta (LSE: ANTO) is a well-run FTSE 100 company. Its strong balance sheet and focus on cost discipline and operating performance enabled it to continue investing through the recent cyclical downturn. And as today’s annual results show, it’s well positioned to deliver for investors as the cycle turns back up.

Antofantastica

The company said that the average realised copper price in 2017 was 29% higher than in 2016. This helped it to post a 31% increase in revenue to $4,749m on marginally lower production of 704,300 tonnes and with non-core metals and its railway operation making a net positive contribution to the top line.

Due to miners’ operational gearing (relatively high fixed costs), increases in revenue are magnified at the profit level. As such, Antofagasta’s operating profit soared 99% to $1,841m. Together with increased profits from associates and joint ventures, this fed down to a 119% increase in underlying earnings per share (EPS) to $0.76 versus a City consensus of $0.75. And the board hiked the dividend 177% to $0.51, compared with City expectations of $0.35.

At current exchange rates, EPS translates to 54.8p and the dividend to 36.7p. The shares are trading 2.5% higher at 910p, as I’m writing, so the price-to-earnings (P/E) ratio is 16.6 and the dividend yield is just over 4%.

With the copper price buoyant, the company guiding on production of 705,000 to 740,000 tonnes for 2018 and having plans that could lift this to 800,000 tonnes in 2019-21, I see Antofagasta’s valuation as attractive and I rate the stock a ‘buy’.

Golden future

Also on my blue-chip ‘buy’ list is Footsie gold miner Randgold Resources (LSE: RRS). The company released its annual results last month, posting a seventh consecutive year of record production and a 7% increase in revenue to $1,280m.

EPS advanced 12% to $2.96 (213p at current exchange rates) and the board doubled the dividend to $2 (144p). With the shares trading at 6,075p, as I’m writing, the P/E is 28.5 and the dividend yield is 2.4%.

Clearly this is a richer rating than Antofagasta’s. However, precious metals miners tend to trade on higher P/Es, Randgold’s balance sheet is even stronger than the copper miner’s, and there’s also been time for City analysts to revise their forecasts since Randgold’s results. The new consensus is for a 22% rise in EPS for 2018 to $3.62 (261p), bringing the forward P/E down to 23.3 and another hefty hike in the dividend to $2.82 (203p), pushing the forward yield up to 3.3%.

I view this valuation as attractive for the London market’s heavyweight goldminer, which ended last year with net cash of $720m on its balance sheet. The forecast growth for 2018 should be more than a flash in the pan, with the company reminding us today that its “10-year business plan is designed to increase net cash flows to support dividend and value growth and maintain Randgold’s position as a global industry leader in sustainable profitability.”

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

G A Chester has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Asian man looking concerned while studying paperwork at his desk in an office
Investing Articles

After gaining 34% in a month, is the Nvidia share price now uninvestable?

Our author says the Nvidia share price is very high at the moment. He's cautious when considering investing in the…

Read more »

Businessman use electronic pen writing rising colorful graph from 2023 to 2024 year of business planning and stock investment growth concept.
Investing Articles

This under-the-radar FTSE 100 share has hiked dividends 13.7% a year for a decade. Time to buy?

Harvey Jones is kicking himself for missing out on this FTSE 100 share that's kept investors happy with long-term share…

Read more »

British union jack flag and Parliament house at city of Westminster in the background
Investing Articles

Labour winning the general election would be positive for UK stocks, says JP Morgan

One mega-bank thinks certain UK stocks could benefit following the 4 July election. This writer considers a FTSE share that…

Read more »

Older couple walking in park
Investing Articles

No savings at 40? Here’s how I’d aim to retire comfortably with FTSE 100 stocks

It's never too late to begin investing in FTSE 100 stocks for retirement. Royston Wild reveals three steps to help…

Read more »

Young Asian man drinking coffee at home and looking at his phone
Investing Articles

Down 17%, is National Grid’s share price a FTSE 100 bargain?

National Grid's share price has taken a battering following a multi-billion-pound rights issue and dividend rebasement. Is it now too…

Read more »

Environmental technology concept
Investing Articles

Up 150% this year! Can NVIDIA stock keep on soaring?

Christopher Ruane explains why NVIDIA stock has soared over 150% already this year, where it might be going -- and…

Read more »

Investing Articles

Down 44% in a year, here’s why the Aston Martin share price could keep struggling

Not only has the Aston Martin share price collapsed in recent years, our writer sees its current business performance as…

Read more »

Investing Articles

I’m considering these 2 high-growth stocks to buy as a technology investor

Our author thinks Kainos and Softcat could be two of Britain's best tech investments. He thinks the risks in the…

Read more »