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This FTSE 100 stock has crashed 40% this year, but could it be time to load up?

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The share price of silver and gold-miner Fresnillo (LSE: FRES) is down 40% since the start of the year, making it the biggest faller in the FTSE 100. Meanwhile, small-cap internet marketing group XLMedia (LSE: XLM), which released its half-year results today, has seen an even bigger decline, it’s shares being off almost 50%. Is this a great opportunity to buy a slice of these two businesses?

Multiple issues

XLMedia’s main assets are websites that publish content relating to online gaming. Revenue comes from operators who pay a commission for the leads the websites generate. The major cause of the decline in the share price was a profit warning in June. The price plummeted 30% on the day.

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Today’s results were peppered with the numerous issues that hurt XLMedia’s first-half performance. Many related to regulation, including the closure of the Australian online casino market, regulatory uncertainty in some European markets and more stringent gambling advertising regulations in the UK. The group also saw a reduction in activity, due to factors including spamming and other attacks on its websites, as well as technical issues. It also saw lower levels of mobile traffic within the gaming segment.

Not cheap enough

XLMedia’s revenue and profit fell by a low-teens percentage in the six months to June and the company said it’s on track to meet (previously-revised-down) profit expectations for the full-year. It spent over $45m on a series of acquisitions in the first half and expects to accelerate this activity, with a particular focus on diversifying into the personal finance sector.

Management is upbeat about the outlook for the company, but the shares are trading 3% down on the day at 103p, as I’m writing. The valuation is 10 times forecast earnings and the forward dividend yield is 4.3% (if we assume today’s 25% cut in the interim is carried through to the full-year). Given the multiple issues and uncertainties, I don’t think the valuation is cheap enough, so this is a stock I’m avoiding at the current price.

Plenty cheap enough

Fresnillo is a stock I’ve tipped a number of times at higher prices, most recently at what was then a two-year low of 920p. The shares are currently trading at around 860p, having bounced from a recent sub-800p low. This has very much been a case of, “just because you think a stock is cheap, doesn’t mean it can’t get cheaper.”

Fresnillo revised down its silver production guidance earlier this year but this was balanced by raised guidance on gold production. Persistent weakness in gold and silver prices has been behind the steady decline in Fresnillo’s shares. With plenty of jitters-inducing stuff going on in the world, including Donald Trump’s escalating trade war with China, I’ve been surprised by the weakness of gold and silver. It seems the dollar has been the safe haven of choice during the period. Meanwhile, Fresnillo’s share price has languished — in marked contrast to the near 2,000p it reached following the UK’s Brexit vote.

However, I continue to see the miner as offering good value as both a hedge against short-term shocks and as a long-term investment. A rating of 18 times earnings and a prospective dividend yield of 3% make it plenty cheap enough by historical standards, so it remains a ‘buy’ in my book.

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G A Chester has no position in any of the shares mentioned. The Motley Fool UK has recommended Fresnillo. 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.

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