Key points
- Jubilee Metals Group is currently trading at a discount
- Strong growth in earnings and profit before tax
- Good choice for my long-term holdings
I’ve found that one of the best ways to increase the value of my portfolio is to find a relatively small stock with strong underlying fundamentals. I believe Jubilee Metals Group (LSE: JLP) is a top growth stock on the AIM 100 index. In brief, it is a metals retreatment and recovery company that processes the waste products from mining metals, like copper. It operates in South Africa, Zambia, Mauritius, and Australia. Let’s take a closer look.
Strong financials
The first reason I like Jubilee Metals Group is its solid earnings-per-share (EPS) record. For the year ending 30 June 2019, EPS was 0.48p. For the same period in 2021, the figure stood at a whopping 1.81. This means that in two years, EPS grew 377%.
While this may not be an indication of future performance, it is evidence that the company has ample opportunity to expand its operations. This stock does not pay a dividend either, meaning that it retains these earnings to reinvest into the business. This will hopefully continue to drive growth.
The last five years, however, paint a mixed picture in terms of company revenue. For the years ended 30 June in 2017 and 2018, Jubilee Metals recorded losses before tax. In fairness, these losses narrowed significantly over the two years. While in 2017 this figure stood at £20.42m, the 2018 loss was a mere £2.4m.
Furthermore, profits before tax have accelerated for the same periods in 2019, 2020, and 2021. In fact, this has increased 541% from 2019 to 2021. This staggering growth simply supports the argument that the stock is functioning extremely well and is a no-brainer pick for me.
Why this stock is a bargain
Elsewhere, the company has a price-to-earnings (P/E) ratio of 10.2. This data, taken with its most recent EPS, allows me to calculate the fair value share price of Jubilee Metals. Taking these figures into account, the shares would be worth around 18.46p each. Based on current pricing, shares in this stock are trading at a 13.3% discount. This truly makes Jubilee Metals a ‘cheap’ stock and is a major factor why I’m adding this to my portfolio. I sincerely hope the strong financials are soon reflected in the share price.
While the underlying data indicates bright times ahead for Jubilee Metals, an investment in this stock is not without its risks. Due to the nature of the business – metals recovery and retreatment – there is a constant exploration risk. A decision by the company to invest in exploration for metals waste may deliver inadequate returns. This means potential downside risk to the share price. The other risk is purely political in nature and concerns Jubilee’s areas of operation. There is the small possibility that the company could be impacted by civil unrest or war in these countries. This might again dent profitability and share price.
These remote risks aside, I like this company and its recent growth is extremely impressive. Given that it is currently trading at a discount, I will be buying Jubilee Metals for long-term growth.