Go to ...

ModernGraham

Value Investing Research Since 2006

RSS Feed

Saturday, January 19, 2019

Lucara Diamond Corp Valuation – March 2018 $TSE-LUC


Company Profile (obtained from Marketwatch): Lucara Diamond Corp. is a diamond development company, which focuses on the development and operation of diamond properties in Africa. It operates through the following business segments: Karowe Mine, Corporate, and Other. The company was founded on July 31, 1981 and is headquartered in Vancouver, Canada.

LUC Chart

LUC data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of TSE-LUC – March 2018

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $878,045,081 Fail
2. Sufficiently Strong Financial Condition Current Ratio > 2 5.84 Pass
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -553.10% Fail
6. Moderate PEmg Ratio PEmg < 20 10.45 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.68 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 5.84 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.00 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $0.22
MG Growth Estimate 15.00%
MG Value $8.43
Opinion Undervalued
MG Grade B
MG Value based on 3% Growth $3.18
MG Value based on 0% Growth $1.86
Market Implied Growth Rate 0.98%
Current Price $2.29
% of Intrinsic Value 27.15%

 

Lucara Diamond Corp is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the small size, insufficient earnings stability or growth over the last ten years, and the poor dividend history. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $0.08 in 2014 to an estimated $0.22 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.98% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Lucara Diamond Corp revealed the company was trading above its Graham Number of $1.96. The company pays a dividend of $0.1 per share, for a yield of 4.3%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 10.45, which was below the industry average of 42.77, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-0.03.

Lucara Diamond Corp performs fairly well in the ModernGraham grading system, scoring a B.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$0.03
Graham Number $1.96
PEmg 10.45
Current Ratio 5.84
PB Ratio 2.68
Current Dividend $0.10
Dividend Yield 4.28%
Number of Consecutive Years of Dividend Growth 4

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2017
Total Current Assets $128,865,000
Total Current Liabilities $22,058,000
Long-Term Debt $0
Total Assets $467,131,000
Intangible Assets $0
Total Liabilities $139,362,000
Shares Outstanding (Diluted Average) 383,976,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $0.20
Dec2017 $0.22
Dec2016 $0.24
Dec2015 $0.27
Dec2014 $0.15
Dec2013 $0.18
Dec2012 -$0.02
Dec2011 -$0.05
Dec2010 -$0.06
Jul2009 -$0.03
Jul2008 -$0.02
Jul2007 -$0.01

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.22
Dec2017 $0.22
Dec2016 $0.21
Dec2015 $0.16
Dec2014 $0.08
Dec2013 $0.03
Dec2012 -$0.04
Dec2011 -$0.04
Dec2010 -$0.03
Jul2009 -$0.02
Jul2008 -$0.01

Recommended Reading:

Other ModernGraham posts about the company

10 Undervalued Stocks for the Enterprising Investor – August 2017
10 Best Stocks for Value Investors This Week – 7/22/17
10 Low PE Stock Picks for the Enterprising Investor – July 2017
Lucara Diamond Corp Valuation – Initial Coverage $TSE:LUC

Other ModernGraham posts about related companies

MAG Silver Corp Valuation – Initial Coverage $TSE:MAG
Osisko Gold Royalties Ltd Valuation – Initial Coverage $TSE:OR
Alcoa Corp Valuation – Initial Coverage $AA
New Gold Inc (USA) Valuation – Initial Coverage $NGD
Dominion Diamond Corp Valuation – Initial Coverage $TSE:DDC
Lundin Mining Co Valuation – Initial Coverage $TSE:LUN
Lucara Diamond Corp Valuation – Initial Coverage $TSE:LUC
Teck Resources Ltd Valuation – Initial Coverage $TSE:TECK.B
Consol Energy Inc Valuation – March 2017 $CNX
Stillwater Mining Company Valuation – Initial Coverage $SWC

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Tags: , , , , ,

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

More Stories From Canadian

About Benjamin Clark