What would have happened if I had put my money into Polymetal shares a decade ago – and what forward-looking lessons might that offer investors today?

Price collapse

The share price performance has been abysmal, in short.

Over the past 10 years, Polymetal shares have lost 70% of their value.

That is not the full story, however.

Dividend income

As an investor, owning shares can potentially be financially rewarding in a couple of different ways. A share price gain is one. But dividends can also improve one’s return.

On the dividend front, Polymetal shares have been impressive performers over the long run.

Last year, none were paid. But the prior year saw dividend per share of $0.45. The year before that, the payout per share was $1.29. Over the last decade, the per-share dividends paid by the company add up to $4.91. At today’s exchange rate, that is around £3.81.

Even including that, I would still be underwater on an investment in Polymetal shares a decade ago – but by much less than suggested by share price alone. My holding today and collected dividends would be worth around 90% of my initial investment.

Wider lessons

With Polymetal shares about to disappear from the London market, however, why would I be reflecting on the past decade’s performance of a share I do not own?

One thing that can help set great investors like Warren Buffett apart from the crowd is that they learn from mistakes – not only their own, but also those of other people.

Ultimately, if I had put money into Polymetal shares a decade ago, it would have been an unrewarding decision.

But the dramatic fall in share price would have been partly compensated for by the company’s stream of chunky dividends over much of the past decade. When considering whether to add shares to my portfolio, I need to consider both growth and income prospects.

With its mining focus, Polymetal’s fortunes are party tied to the metals cycle. In cyclical industries like mining, oil production and housebuilding, high selling prices can propel shares upwards. But once those prices fall – for example because the lofty cost reduces customer demand – that can hurt profits. As the 10-year history of Polymetal shares illustrates, in a cyclical industry like mining, getting in ahead of the curve can be much more rewarding than buying in at a peak.

Last year, the company made a post-tax loss. But the prior year’s profit was bigger than the current market capitalisation. Indeed, using a historical price-to-earnings (P/E) ratio, Polymetal shares could look positively cheap.  

That is a good reminder that, although a P/E ratio can be a helpful analytical tool for investors, it is never a good idea to use it in isolation. One also needs to consider other factors when evaluating a possible share purchase, from a company’s balance sheet to the risks involved.

The post If I’d invested in Polymetal shares a decade ago, would I have made money? appeared first on The Motley Fool UK.

Sanctions imposed on Russia since it invaded Ukraine have disrupted the company’s operations in the country, putting the share price under considerable pressure. To compound difficulties, the firm was also excluded from the FTSE equity indexes, but it did retain its London Stock Exchange (LSE) listing.

I don’t own shares in the business. But if I’d invested £1,000 in mid-2018 how much would I have today? Let’s explore.

Five-year performance

Five years ago, the Polymetal share price stood at £6.66. After enjoying an upward trajectory for over two years, the shares peaked in September 2020. Subsequently, they entered a prolonged downtrend and fell off a cliff when the war started.

Today, the stock trades for £1.86. That’s a disastrous 71% decline over the past half-decade.

So, if I’d invested £1,000 in the company in 2018, I could have bought 150 shares with £1 left as spare change. Today, my shareholding would have shrunk in value to a meagre £279.

However, the company paid dividends over the period. Polymetal was once a leading FTSE 100 dividend stock before the payouts were cancelled due to the conflict. Since 2018, I’d have earned £344.79 in passive income, bringing my total return to £623.79. That equates to a loss of £376.21.

Delisting and divestment

Polymetal began trading on the LSE in 2011, but this era could soon be drawing to a close. Last month shareholders approved a proposal to re-domicile the company in the Astana International Finance Centre in Kazakhstan. The company’s abandoning its current Jersey registration and LSE listing as a result. This process is expected to complete on 17 July.

The move is part of a wider plan to divest the firm’s Russian business, which accounted for around two-thirds of its revenue in 2022. Polymetal intends to ring-fence its Russian subsidiaries to ensure compliance with Western sanctions.

This leaves investors in a pickle. They could move their holdings to a broker that operates on the AIX exchange. However, Freedom24 — one of the platforms recommended by Polymetal — isn’t opening accounts for UK residents at present.

These developments will be hugely disappointing for British shareholders keen to maintain their positions, especially in light of the company’s recent guidance. Polymetal claims it has started 2023 “from a position of relative strength“. The firm expects free cash flows will resume and net debt will fall as the year unfolds.

Should investors buy?

If investors are tempted to add a gold and silver miner to their portfolios, Polymetal shares arguably look pretty cheap right now. Provided revenues recover, this could be a comeback story in the making.

However, UK investors run the risk of being left with warrants or bonds. Alternatively, they might feel forced to sell. A final option might be to go through the complicated process of transferring their shareholdings to a suitable European or Asian broker.

The uncertainty that comes with the company’s LSE delisting, coupled with the ongoing repercussions of severe sanctions, is enough to put me off. I won’t be buying.

The post If I’d invested £1k in Polymetal shares 5 years ago, here’s how much I’d have now! appeared first on The Motley Fool UK.

So what’s been going on with the share price, and what’s next for this gold miner?

A year of headwinds

Early on in the war, Polymetal highlighted challenges relating to funding as a result of sanctions placed on Russian banks — buyers of gold — and the state as a whole. At that point, the miner had not been sanctioned itself, but shares were trading for a fraction of where they had been pre-war.

A year ago, I knew of several investors who looked at this discounted stock and bought it. But if I’d invested £1,000 in the stock a year ago, today I’d have £790. That’s clearly not a good return on an investment.

It’s also worth highlighting that Polymetal stopped its dividend after the war — so I wouldn’t have received any dividends. Unfortunately for me, I owned Polymetal before the war.

Is there any upside?

Polymetal is a challenging company to value right now. For the year year ended 31 December, the gold miner reported a surge in operating costs due to the sanctions against Russia. Profits dropped and cash flow turned negative.

However, Polymetal noted that “disruption was largely eliminated in Q4 2022”, indicating that 2023 would likely be a better year, adding “the resumption of free cash flows and a reduction in net debt over the course of the coming year“.

It’s also worth noting that the Kazakh business is not impacted by the recent US sanctions. In 2022, its operations in Kazakhstan delivered around 500,000 oz of gold, versus 1.2m oz in Russia.

Delisting

Shareholders have been hit with more uncertainty. Polymetal plans to leave the London Stock Exchange on 17 July — subject to a shareholder vote next week. The Anglo-Russian gold and silver producer plans to move its primary listing to the Astana Stock Exchange (AIX).

This could be a challenge. That’s because if I still owned the shares, it wouldn’t be easy for me to access them — buying or selling — on the AIX. Unsurprisingly, my brokerage doesn’t provide me with access to Kazakh-listed stocks.

My verdict

I’d suggest that Polymetal could be undervalued, but that’s very hard to accurately assess right now. But the guidance is positive and, as mentioned, around 30% of its operations are not impacted by sanctions.

However, I’m not sure it’s worth the risk or the hassle. Assuming the delisting goes ahead, I’d have to find a broker to allow me to trade these stocks, and there’s always the risk that things could get worse. Maybe Moscow will nationalise the company — I wouldn’t bet against it as the war drags on.

The post If I’d invested £1,000 in Polymetal shares a year ago, here’s what I’d have today! appeared first on The Motley Fool UK.

The price-to-earnings ratio of the Footsie is still only 14. That’s a lot cheaper than its 10-year average of 19 or the US S&P 500‘s P/E ratio of 24. 

And among all the companies on the index, here are my top three most undervalued right now. 

As cheap as the 90s

My first pick is the £60bn pharma giant GSK (LSE:GSK). It’s easy to see the value here when I could snap up a share today for £14.75, the same price the stock was in the late 1990s.

I’m shocked to see a P/E ratio of only 10 at that price. Especially compared to its competitor AstraZenaca’s P/E ratio of 49.

I suspect that GSK spinning off its consumer healthcare segment into Haleon last July didn’t help matters. The stock is down 18% since then.

But earnings-per-share of £0.72 in 2014 leapt to £1.22 in 2022. That 69% increase tells me underlying performance has been strong. 

The future looks promising too. With 60 new drugs in the research and development phase, I think I’ll open a position here soon.

Over 8% dividend

Second up is Legal & General (LSE: LGEN), a firm that sells a wide range of financial services like pensions and has been in operation since 1836. 

Shares go for £2.30 currently. That makes a 6.42 P/E ratio which seems extremely cheap.

One reason the P/E ratio is low is that the firm operates in a mature market, so there’s less room for growth. 

But a dividend yield of 8.39% — the fifth-highest of any FTSE 100 company — makes me think that it’s undervalued at that share price.

The dividend was paid from just 48% of earnings last year, so it seems to me that the high payouts are sustainable, too.

For these reasons, I already own a position in Legal & General and may pick up more shares at this cheap share price.

Shares for 89% off?

My third choice is Anglo-Russian miner Polymetal (LSE:POLY). The firm’s mines in Russia and Kazakhstan make it a top-10 producer of gold and top-five producer of silver worldwide.  

A share here used to cost £20.28 in 2020. But the company’s association with Russia threw up sanctions and other problems, particularly since the invasion of Ukraine.

The firm posted a loss in 2022 for the first time in eight years, and the share price dropped a staggering 89% all the way down to only £2.45.

But the core business continued smoothly. Revenues last year remained at around £3bn. And with management expecting a return to profit this year, the price looks far too cheap if you ask me.

Sadly, Polymetal just announced it will move to the Astani International Exchange from the London Stock Exchange. The move will allow the company to sidestep some of those sanctions. 

But, it will also cause me all sorts of headaches if I wanted to buy and sell shares. As such, I’ll be leaving this stock alone.

The post 3 FTSE 100 stocks I don’t think will stay cheap for long appeared first on The Motley Fool UK.

The drop came after the company announced its plan on 10 May to delist from the London Stock Exchange (LSE) and move to the Astana International Exchange (AIX) in Kazakhstan.

The move followed a promising period for the mining firm. Shares had shot up 39% since March.

What’s going on here? And does this uncertainty offer a rare opportunity to pick up shares on the cheap?

The Russian connection

Polymetal extracts precious metals from mines in Russia and Kazakhstan. Its access to these vast resources in Central Asia makes it a top-10 producer of gold and a top-five producer of silver worldwide. 

The key detail here is that while the firm is headquartered in Jersey and was even a member of the FTSE 100, it was founded in Saint Petersburg.

This association with Russia meant that 2022 threw massive problems at the Anglo-Russian miner. As Russian tanks rolled into Ukraine, the company lost 89% of its value inside a month.

Surprisingly, Polymetal sustained near-£3bn in revenues, but a variety of sanctions slashed the firm’s margins. Ultimately, the company posted a loss for the first time in eight years. 

The result was that the firm – which boasted a strong annual yield of 7% in 2021 – cancelled dividends for the year.

2023 resumption of cash flows

Good news arrived recently in the miner’s March 16 annual report.

The important line, I think, was that “disruption was largely eliminated in Q4 2022”. The company sounds confident that problems from the Ukraine war had been overcome.

In fact, management expects “the resumption of free cash flows” in 2023. 

An 89% discount

The opportunity here seems obvious to me. I could pick up shares today for £2.42 each – an 89% discount on the all-time high of £20.28. 

Better still, the company’s market cap is down to just £1.15bn. That makes the price-to-book ratio just 0.63 which would give me a huge margin of safety. That’s like getting £1 in assets for every 63p I invest. 

If cash flows get back to normal, this would surely be one of the most undervalued stocks around.

17 July delisting

The big problem for me is Polymetal’s recent announcement that it will move its listing from the LSE to AIX. 

Doing this would allow the company to split its Russian and Kazakhstani mines into separate entities. Then, the Kazakhstani side of the business could neatly sidestep all sanctions.

The danger is that it won’t be easy for me to buy and sell shares. Right now, there aren’t any UK brokers that facilitate trading on the AIX.

The planned date for Polymetal to delist from the LSE is 17 July. After that date, the future of any shares I own becomes uncertain. 

One option is to find a way to transfer them to another broker based in the EU or in Asia that allows AIX trading. 

If I can’t, I may be forced to sell them or be offered warrants or bonds.

Am I buying?

All in all, I do think Polymetal looks undervalued right now. But the uncertainty around delisting from the LSE puts me off opening a position in the firm.

The post What’s going on with the Polymetal share price? appeared first on The Motley Fool UK.

J D Wetherspoon

J D Wetherspoon (LSE:JDW) owns and operates 852 UK pubs. The company became profitable this year, but faces a challenging 2023 as high interest rates impact the economy.

Whether customers continue to visit will play a huge part of meeting earnings growth estimates of 30%. To calculate the fair value, it can be helpful to use the discounted cash flow calculation, establishing a suitable share price based on the present day value of current and future earnings. The current share price of 660p is 89% more than the calculated fair value of 336p.

Considering earnings growth and profit margins, the current price-to-earnings (P/E) ratio of 43 times is also far above the fair value of 25 times.

These calculations indicate that substantial growth is already priced into the shares. If the company can retain customers, an investment may be profitable. However, if customers feel the strain, and earnings start to decline, then it looks likely that these high valuations will dissuade investors.

Ceres Power

Ceres Power (LSE:CWR) develops fuel cells in North America, Asia, and Europe. Shares in the company had a tremendous rise in 2020 as enthusiasm in speculative growth stocks spiked. However, with the company still unprofitable, the inflationary and more restrictive economy has led to a major decline in the share price.

It is possible that the shares could still be highly overvalued. The price-to-sales (P/S) ratio of 29.1 times is substantially higher than the industry average of 1.4 times. Looking at the discounted cash flow, a fair value of 41p is 685% above the current price of 326p.

There are some positive signs. Earnings growth estimates of 50% are high, the company has no debt, and the products appear to be effective. But with no profit likely in the next three years, an investment in the company is difficult to justify.

Polymetal International

Polymetal International (LSE:POLY) mines precious metals such as gold and silver in Central Asia and Europe. The company was reliably profitable in recent years. However, it was unable to make a profit this year, as supply chains and geopolitical tensions limited the business.

More volatile than 90% of UK shares, this company is not for the faint hearted. On average, the stock moved 12% each week as investors assessed the viability of the company through geopolitical tensions.

The major concern is the uncertainty around key markets in Russia and Khazakstan. Analysts have suggested that Polymetal may re-list on the Abu Dhabi exchange as UK shares linked to Russia struggle on the London Stock Exchange.

The price-to-sales (P/S) ratio of 0.4 is lower than the industry average of 1.3, and demand for precious metals continues to grow due to the adoption of electric vehicles. However, with Polymetal struggling to convince investors of a long-term future, I will not be considering it as part of my portfolio.

What’s next?

All three of these UK shares have one thing in common — uncertainty. Whether this is a question of keeping up with investor expectations or retaining customers, I’m looking to invest my money elsewhere.

The post 3 UK shares I’m avoiding in April 2023 appeared first on The Motley Fool UK.

When Russian tanks started rolling in during February, shares in the precious metals miner collapsed. Polymetal has a couple of gold and silver mines in Kazakhstan, but the majority of its operations are in Russia.

Heading towards the anniversary of the invasion, Polymetal shares are showing a 12-month fall of 75%.

Production

Production, however, remains strong. Despite sanctions, there’s no shortage of customers in Russia itself and in parts of Asia. Gold production for the 12 months to December 2022 increased by 2%, with silver up 3%.

Revenue declined a little, down 3%, and net debt climbed 45% to $2.4bn (£2bn). But debt did drop 14% in the final quarter. It’s still a big chunk of debt for a company with a £1.2bn market cap, though. But Polymetal is targeting free cash flow generation in 2023, so it should hopefully continue to reduce.

Valuation

It’s hard to put a share valuation on Polymetal based on any of the usual fundamentals. In the first half, statutory earnings per share (EPS) came in negative, but we saw a modestly positive underlying EPS figure. If the second half turns out better, as the company appears to believe, I could see a full-year price-to-earnings (P/E) ratio in single digits.

Generally, I’d say the year-end financial situation looks reasonably promising in the circumstances. And it must be tempting to think Polymetal can survive until the end of the war. After that, if sanctions are lifted, maybe it will get back to a higher valuation?

Price dip

Polymetal shares were gaining in the run-up to the update. So why the sudden crunch again? It appears it’s nothing financial. The announcement spoke of “a potential re-domiciliation of the parent company, Polymetal International plc, to jurisdiction deemed to be ‘friendly’ by the Russian Federation.”

Right now, Russia won’t let Polymetal sell its gold and silver to any countries it does not consider friendly. Any move looks unlikely to happen before 2024, so the danger does not appear to be imminent. But the board is eyeing up Astana, Kazakhstan as its new corporate home.

Current shareholders?

If that happens, the stock’s main listing seems likely to move from the London Stock Exchange to Kazakhstan. What would that do to current shareholders? Will they get some sort of equitable deal? Might they end up with something priced in Kazakhstani Tenge and hope there’s some way of getting it out? Could they simply lose their investments?

There’s simply no way to tell right now.

Polymetal shares might well look good to investors who can tolerate high risk. And I wouldn’t be surprised if some are tempted by a small investment. But for me it would be a complete gamble, so I’ll stay well clear.

The post Down 75%, does the Polymetal share price make it a buy now? appeared first on The Motley Fool UK.

Given that Polymetal owns eight gold and silver mines in Russia, and two in Kazakhstan, it’s not surprising that the company’s share price has been badly hit by war-linked sanctions and export bans.

The share price has since recovered somewhat to around 244p. And over the past nine months, it’s been reasonably stable.

This makes me wonder whether the shares are now a bargain. Is this the perfect time to buy a stock that under a year ago was a member of the FTSE 100?

All that glitters …

To my surprise, the company’s production hasn’t been too badly affected by international sanctions imposed on Russian exports. Production during the last quarter of 2022 was 15% higher than a year ago.

Last week, the FT reported that there’s been a recent “surge” in the number of Russian retail investors buying gold. Sales to Asian markets have also been largely unaffected by the restrictions. This is helping the company to reduce its stock of metals that had accumulated during previous quarters.

But the financial performance of the company has suffered.

Revenue during the first half of 2022 was 18% down compared to the previous year. And, the company reported a net loss of $321m in H1, compared to a profit of $660m during the same period a year earlier. However, this was due mainly to the write-down (by $689m) of its Russian assets. This is a non-cash accounting entry which is likely to be reversed once sanctions are eased.

An alternative — and more popular — measure of profitability is EBITDA (earnings before interest, tax, depreciation and amortisation). This was $426m in the six months to 30 June 2022, albeit 35% lower than in H1 2021.

Should I invest?

Gold is currently trading at around $1,930 an ounce. Predicting future commodity prices is difficult and subject to a huge number of influences. But Fitch Solutions is forecasting gold prices for the next four years of $1,850 (2023), $1,750 (2024), $1,700 (2025) and $1,690 (2026). If correct, and based on current production levels, future revenues at Polymetal will fall.

However, my biggest concern is that the company is considering moving its primary stock exchange listing from London to Kazakhstan.

At present, the Russian government is only permitting exports of precious metals to ‘friendly’ countries. By moving its domicile from Jersey, it’s hoped that the company’s Russian operations can be placed into a separate legal entity. This could then facilitate exports to a greater number of countries.

The move isn’t expected to take place until 2024 but it remains unclear how shareholders in the existing business will be affected. For this reason alone, I’m not going to invest.

The post Polymetal shares have crashed 80% in 12 months! Is it time to bag myself a bargain? appeared first on The Motley Fool UK.

So let’s take a closer look at what’s been moving the Polymetal share price and see whether this Anglo-Russian miner might be worth the risk.

War has been bad for business

Russia’s invasion of Ukraine has brought death and destruction, but it’s also negatively impacted the domestic economy of both nations.

Polymetal has not been the subject of Western sanctions, but it has been impacted by them. Early on in the war, the gold miner, which has operations in both Russia and Kazakhstan, highlighted uncertainty around funding as a result of sanctions placed on Russian banks and the state as a whole.

At the time, fellow Russian miner Petropavlovsk said that its sales had fallen after its main customer, Gazprombank, was placed on a European sanctions list. 

And this appears to have impacted Polymetal too. In its September report, the firm said that gold sales were lagging production.

Into the red

In late September, Polymetal said it had swung to a half-year loss. Gold sales were down 23%, while silver sales increased 9%. Revenues fell 18% to $1.05bn in the six months.

The company’s average realised gold prices rose 4% while silver fell 14%. But this was in line with the wider market. Adjusted EBITDA fell 35% to $426m.

Polymetal declared a net loss of $321m, against a net profit of $419m a year previously. Meanwhile, net debt surged to $2.8bn from $1.6bn a year ago. None of this is positive.

However, Polymetal’s management remained optimistic. “The gap between sales and production is expected to start closing during the third quarter, as the company ramps up exports sales to various Asian markets“, the company said.

Improving outlook?

There are some positives. Production is broadly in line with where management expected it to be. The miner still has said it expects to produce 1.7m ounces of gold this year — 1.2m oz in Russia and 500,000 oz in Kazakhstan. 

And, as noted in the update, Polymetal is looking to find new buyers in Asian markets, and that should help the business recover.

Of course, by some metrics, Polymetal looks quite attractive as well. It has a price-to-sales ratio of around 0.5 — that’s very low. But the figure is not truly reflective of the challenging operating environment.

While the war is ongoing and Russia escalating the situation by annexing four regions, Polymetal’s prospects largely hinge on its ability to sell its gold and silver to new customers, without providing sizeable discounts.

I already owned Polymetal shares before the war. And with the share price down 84% over the past year, it’s not been good for me. Would I buy more? Well I already have at the discounted share price, but I’m happy with my current exposure. So I won’t be buying more. There’s clearly plenty of risk here.

The post What’s next for the Polymetal share price as the Ukraine war enters a new phase? appeared first on The Motley Fool UK.

The price-to-sales (P/S) metric indicates a company’s revenue against its value. The ratio is calculated by taking a company’s market capitalisation and dividing it by the firm’s revenue over the past year.

The metric is normally used when a company isn’t making a profit. For example, I may use this more often when I’m looking at growth stocks. Tesla is one of the few companies making a profit in the EV industry, so using the P/S ratio, I can easily compared Tesla’s valuation against its peers.

Meanwhile, the price-to-earnings (P/E) ratio is more frequently used and is calculated by dividing the market value by the company’s earnings.

So, let’s take a look at the cheapest UK-listed shares using these metrics.

Polymetal

Polymetal (LSE:POLY) is an Anglo-Russian mining stock and its share price tanked after the Russian invasion of Ukraine. Sanctions have made it hard for the company to continue operating as normal.

The mining group has highlighted uncertainty around funding as a result of sanctions placed on Russian banks and the state as a whole.

It may also struggle to sell its main product, gold. Fellow Russian Petropavlovsk said that its sales fell after its main customer, Gazprombank, was placed on the European sanctions list. 

It’s fair to say that gold mining stocks should be doing pretty well this year, but Polymetal isn’t. It’s down 89% over the past 12 months.

Following a solid showing in 2021, the company now trades with a P/E ratio of 1.1. Meanwhile it has a P/S ratio of 0.3. Both of these figures are exceptionally low, correctly suggesting that something is wrong.

On the plus side, Polymetal expects to produce 1.7m ounces of gold this year — 1.2m oz in Russia and 500,000 oz in non-sanctioned Kazakhstan.

Ferrexpo

Ferrexpo (LSE:FXPO) is a Swiss-based miner with operations in Ukraine. The stock also collapsed following Russia’s invasion of Ukraine. It’s down 76% over the past 12 months.

Some 70% of Ferrexpo’s mines are in Ukraine. Last week, the firm announced that total iron ore pellet production fell 27% on the year to 2.1m tonnes during the second quarter. First-half sales were down 21% on the year to 4.4m tonnes.

The fall is production was naturally attributed to the war. However, the company vowed to continue its operations despite a very difficult operating environment.

Iron ore prices have been pretty strong throughout most of the year, so I’d expect Ferrexpo to be doing pretty well if it wasn’t for the war.

Currently Ferrexpo is trading with a P/E ratio of 0.85. It has a P/S ratio of 0.25. Once again, these are exceptionally low figures that correctly indicate that something isn’t right.

Would I buy either of these stocks?

I actually owned Polymetal shares before the war, and I bought some more when the stock collapsed as a very speculative investment.

Based on the same logic, of a speculative approach, I’d also put a limited amount of money into Ferrexpo shares too.

But it would be a huge gamble. It’s not so much about the assessing the fundamentals of these companies. Instead it’s about predicting or guessing when the war will be over and when sanctions may be removed. That’s a tough call.

The post I’m using the P/S and P/E ratios to find the cheapest UK shares! appeared first on The Motley Fool UK.