Polymetal (POLY) vs. Petropavlovsk (POG) – which share price is better value?

Key points

• Both firms released a statement yesterday that they did not expect to be targeted with sanctions and that operations continued uninterrupted
• For 2021, Polymetal’s gold production increased, while Petropavlovsk’s declined by 17.9%
• Polymetal has a lower trailing P/E ratio, suggesting it may be better value 

With the recent military situation between Russia and Ukraine, many firms operating in the region saw their share prices collapse in a matter of days. Two of these companies are Polymetal International (LSE:POLY) and Petropavlovsk (LSE:POG). In the past month, their share prices are down 85% and 75% respectively. Over the year, they have fallen 89% and 86%, currently trading at 140p and 2.95p. As both mine gold, I want to compare these businesses to see which is a better buy for my portfolio. Should I add to my current Polymetal holding, or buy Petropavlovsk shares instead? Let’s take a closer look.  

Recent results: Polymetal and Petropavlovsk share prices

Investors have rapidly sold shares in both companies out of fear that sanctions will target the firms. On 9 March 2022, however, each business released a statement outlining their shareholder structures. This sought to clarify that none of the major shareholders were linked to the Russian regime.

Consequently, the firms do not expect sanctions to target them under the Russia (Sanctions) (EU Exit) Regulations 2019. I find these statements reassuring given the current tensions.

In this sense, Polymetal may have the edge. The company was quick to point out that Kazakhstan operations actually generate 48% of its net earnings. Furthermore, its gold production increased from 1,637,000 ounces to 1,677,000 ounces between the 2020 and 2021 calendar years. Petropavlovsk, on the other hand, saw its gold production decline by 17.9% over the same time period. Despite this, both of these companies continue their gold mining and production uninterrupted.

Historical comparison: which is better value?

Polymetal’s revenue between the 2017 and 2021 calendar years grew from $1.61bn to $2.89bn. In addition, earnings per share (EPS) increased from ¢70 to ¢188. Investment in this company comes with risk, however, and the ongoing conflict in Ukraine may continue to negatively impact the Polymetal share price.

Meanwhile, Petropavlovsk’s revenue grew from $540m to $988m between the 2016 and 2020 calendar years. Furthermore, EPS declined from ¢1 to −¢1 over the same period. Both of these companies therefore exhibit consistent revenue growth, but Polymetal has a definite edge in terms of historical EPS. 

A comparison of trailing price-to-earnings (P/E) ratios may also indicate if one firm is better value than the other. Polymetal has a trailing P/E ratio of 4.6, while Petropavlovsk’s is 12.85. This would suggest that Polymetal is more of a bargain at current levels. It should be noted, however, that P/E ratios may lose their accuracy in light of recent share price collapses. 

Based on this analysis of earnings, revenue, and P/E ratios, it appears that Polymetal is better value. Given the rapidly evolving military situation in Ukraine, however, I think I’ll wait for more news on the conflict before increasing my current position.