Are the KAZ Minerals and Warpaint London share prices now bargains after 40%+ falls?

Could KAZ Minerals plc (LON: KAZ) and Warpaint London plc (LON: W7L) offer good value for money?

| 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.

Share prices across the FTSE 100 and the wider UK stock market have fallen significantly in recent months. The main index is down by around 10% from its all-time high in May, with investors seemingly concerned about factors such as a global trade war and rising US interest rates.

Shares such as KAZ Minerals (LSE: KAZ) and Warpaint London (LSE: W7L), though, are down much more than most stocks. Following a hugely challenging period, could they now offer wide margins of safety and strong recovery potential?

Challenging outlook

Supplier of colour cosmetics, Warpaint London, recorded a 40%+ share price fall on Monday following the release of a profit warning. Although trading in the US and the EU has remained robust, its performance in the UK has been disappointing. Retailers are reducing stock levels and Christmas orders, which is a significant problem for the business since the UK accounts for 44% of its total revenue.

The company now expects revenue for the 2018 financial year to be between £48m and £52m. Profit before tax is due to be between £8.5m and £10m, although these figures are clearly highly dependent upon the near-term performance of the company’s UK operations. Given that consumer confidence is expected to weaken over the short run, the prospects for the stock could be highly uncertain.

With Warpaint London now trading on a price-to-earnings (P/E) ratio of around 12.3 using last year’s earnings figure, I think it could offer good value for money. However, with the prospects for the UK retail sector being highly dependent upon the outcome of Brexit negotiations, I feel it may be worth waiting for further updates before buying the stock.

Low valuation

The performance of the KAZ Minerals share price in the last year has been hugely disappointing. It has declined by around 40%, with investors becoming increasingly concerned about the global growth outlook in recent months. With the prospect of further tariffs being placed on imports and the potential for a higher US interest rate, the resources sector has been hit relatively hard.

Despite this, the medium-term outlook for the copper and gold markets appears to me to be relatively sound. Demand growth is set to remain robust, while a lack of supply in the copper industry could lead to a buoyant price. This could be beneficial to KAZ Minerals, and may mean that its ramp-up in production helps it to deliver on its optimistic growth targets.

With the company now trading on a price-to-earnings growth (PEG) ratio of 0.5 following its share price fall, it could offer a margin of safety. Clearly, it is a relatively volatile stock that could experience further paper losses over the near term. But with what seems to be an improving financial position, as well as a 2.6% dividend yield that is due to be covered more than 10 times by profit in the current year, I think its long-term growth potential could be high.

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.

Peter Stephens 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

Investing Articles

Up 670% in 2 years! This former penny share is skyrocketing on SpaceX contracts

Shares of Filtronic (LON:FTC) were soaring to multi-year highs today after another contract win with SpaceX. Should I buy this…

Read more »

Investing Articles

Why is the Greatland Gold (GGP) share price up 10% today?

Our writer looks at the reasons why the Greatland Gold (GGP) share price is the AIM 100’s best performer today.

Read more »

Passive income text with pin graph chart on business table
Investing Articles

What do I need for a passive income of £100k a year?

How much would I need to invest to collect a very healthy yearly passive income on my retirement? Surprisingly, the…

Read more »

US Stock

£2k invested in Nvidia stock 2 years ago is now worth this boggling amount…

Jon Smith details how much unrealised profit an investor would have from buying Nvidia stock but is cautious about what…

Read more »

Investing Articles

2 value stocks that still look cheap despite the FTSE rally!

Harvey Jones picks out two UK value stocks that still look nicely priced even as the UK index climbs. He…

Read more »

Dividend Shares

I asked ChatGPT to build the perfect passive income portfolio and here’s the result

Jon Smith turns to the world of AI to try and find out whether ChatGPT could build an investor a…

Read more »

Investing Articles

£20,000 to invest? Here’s how the FTSE 100 could deliver a £2,040 passive income

Here are two ways that investors with a lump sum to spend could target a large passive income with FTSE…

Read more »

Runner standing at the starting point with 2025 year for starting in new year 2025 to achieve business planing and success concept.
Investing Articles

Here’s how someone could start investing in 2025 with just £1,000

Planning to start investing in 2025? This writer highlights two very different stocks that might be worth considering for a…

Read more »