Down 48%, is it time to buy more Polymetal shares?

The price of Polymetal shares looks to be stabilising, so is it a good idea to load up on more shares as production guidance remains unchanged?

| 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.

Shot of a senior man drinking coffee and looking thoughtfully out of a window

Image source: Getty Images

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.

I bought Polymetal (LSE:POLY) shares around three months ago. With the outbreak of hostilities between Russia and Ukraine, I thought the share price of this former FTSE 100 Russian gold miner dropped too low to miss. Currently trading at 230p, should I now be thinking about adding more shares to lower my average weighted price? Let’s take a closer look.

Why did I buy?

Shares in the gold mining firm fell from around 1,000p to 500p when it became clear that war was on the horizon. I bought at 420p with the belief that the conflict would be short and decisive.

I also knew that Polymetal was a solid company, with strong historical results and a relatively low price-to-earnings (P/E) ratio. But more about that later.

Having held the position for some months, I’m now down around 48%. However, I’m not panicking, because the underlying business still looks sound.

Although the share price is correlated to the war, a prolonged conflict is in nobody’s interests. In Europe, the war is causing higher energy prices and surging oil prices globally. In addition, sanctions are biting Russia. 

An end to the war may come sooner rather than later, and this would only be good news for Polymetal. 

However, the war may simply continue without any end in sight, and this could ultimately place the firm in a difficult position further down the line. 

A solid business and potentially cheap shares

One major advantage of having invested in the company over a competitor, like Petropavlovsk, is that around half of Polymetal’s operations and sales take place in Kazakhstan. 

This means that shareholders are partially protected from the impact of the sanctions on Russia. Most of the sales from the Kazakh business have continued uninterrupted to the Far East.

In another display of confidence by the board, it maintained its production guidance of 1.7m ounces of gold in 2022. 

As a current shareholder, this was important to see because it suggests that the management doesn’t believe the war will interfere with day-to-day operations. 

This makes me think that it could be a good idea for me to pick up more shares at these low levels.

While the share price may appear low to me, it might also in fact be cheap. By using forward P/E ratios, I can better understand if a company is under- or overvalued.

Polymetal’s forward P/E ratio is 2.03. This is lower than competitors, including Petropavlovsk and Central Asia Metals. Given recent share price falls, however, P/E ratios may not be the most accurate metric of cheapness.

StockForward P/E ratio
Polymetal2.03
Petropavlovsk2.18
Central Asia Metals5.91

Overall, the situation remains uncertain. With a solid underlying business, however, I think I would benefit from loading up on more Polymetal shares given the beaten-down price. I will be adding more shares soon.

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.

Andrew Woods owns shares in Polymetal International. 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

Mature couple at the beach
Investing Articles

6 stocks that Fools have been buying!

Our Foolish freelancers are putting their money where their mouths are and buying these stocks in recent weeks.

Read more »

Black woman using loudspeaker to be heard
Investing Articles

I was right about the Barclays share price! Here’s what I think happens next

Jon Smith explains why he still feels the Barclays share price is undervalued and flags up why updates on its…

Read more »

Investing Articles

Where I’d start investing £8,000 in April 2024

Writer Ben McPoland highlights two areas of the stock market that he would target if he were to start investing…

Read more »

View of Tower Bridge in Autumn
Investing Articles

Ahead of the ISA deadline, here are 3 FTSE 100 stocks I’d consider

Jon Smith notes down some FTSE 100 stocks in sectors ranging from property to retail that he thinks could offer…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

Why I think Rolls-Royce shares will pay a dividend in 2024

Stephen Wright thinks Rolls-Royce shares are about to pay a dividend again. But he isn’t convinced this is something investors…

Read more »

Investing Articles

1 of the best UK shares to consider buying in April

Higher gold prices and a falling share price have put this FTSE 250 stock on Stephen Wright's list of UK…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

The market is wrong about this FTSE 250 stock. I’m buying it in April

Stephen Wright thinks investors should look past a 49% decline in earnings per share and consider investing in a FTSE…

Read more »

Black father and two young daughters dancing at home
Investing Articles

1 FTSE 250 stock I own, and 1 I’d love to buy

Our writer explains why she’s eyeing up this FTSE 250 growth phenomenon, and may buy more shares in this property…

Read more »