Shares in Petra Diamonds (LSE: PDL) have enjoyed strong gains in 2014 and are currently up 68% since the turn of the year. That blows away the less than 1% gains made by the FTSE 100 during the same time period. However, there could be much more to come from Petra moving forward ? here?s three reasons why.
1) Today?s update from the company was upbeat and showed that it continues to make encouraging progress. For example, production for the year was up 17%…
Shares in Petra Diamonds (LSE: PDL) have enjoyed strong gains in 2014 and are currently up 68% since the turn of the year. That blows away the less than 1% gains made by the FTSE 100 during the same time period. However, there could be much more to come from Petra moving forward – here’s three reasons why.
1) Today’s update from the company was upbeat and showed that it continues to make encouraging progress. For example, production for the year was up 17% and, perhaps more importantly, at 3.1 Mcts was higher than expectations of 3 Mcts. Furthermore, operating costs have been kept well under control and Petra is optimistic about the next few years.
For instance, the company is on track to meet its expectations of 3.2 Mcts for the current year and is still aiming to reach 5 Mcts of production per year by 2019. With demand continuing to exceed supply, Petra expects higher rough diamond pricing in 2015. This would be positive news for the company’s bottom line, and for its shareholders.
2) While on the topic of profitability, Petra is forecast to increase earnings per share by a whopping 41% in the current year. This comes after a strong couple of years and means that, in 2015, Petra’s bottom line is expected to be around 2.7 times bigger than it was in 2012.
With the company expecting further production growth all the way up to 2019 (and a higher rough diamond price), its bottom line looks set to grow at a rapid rate.
3) As well as strong current performance and exceptional growth prospects, shares in Petra could soar over the medium term because they currently offer great value for money. Certainly, on the face of it, that doesn’t seem to be the case. After all, they trade on a price to earnings (P/E) ratio of 15.3, which is higher than the FTSE 100’s P/E of 13.6.
However, when Petra’s strong forecast growth rate is taken into account, it’s a different story. That’s because Petra has a price to earnings growth (PEG) rate of just 0.4, which is hugely appealing and shows that shares in the company offer exceptional growth at a very reasonable price. As such, they could make a positive contribution to your portfolio moving forward.
Of course, Petra isn't the only company that could do so. That's why we've written a free and without obligation guide to Where We Think The Smart Money Is Headed.
Certainly, the rough diamond market is hugely appealing, but there are other stocks and sectors that could make a positive contribution to your portfolio, too. The guide could help you to uncover them and, as such, may make 2014 and beyond an even more prosperous period for your investments.
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Peter Stephens has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.