Six large mining company stocks are trading more than 20% below analysts' mean target prices, implying a strong upside potential for investors, an S&P Global Market Intelligence analysis found.
Of the top 25 companies by market capitalization, 19 mining company stocks are trading below analysts' mean target prices. Six of the top companies are trading above analysts' price targets.
"Whatever the labels we use to describe the phenomenon it is undoubtedly the case that the dispersion in valuations between different sectors of the economy has reached an extreme level," Bernstein Research analyst Paul Gait wrote in a November note to investors. "Nowhere is this more noticeable than in mining; the relative value of mining versus the broader market is at a 100-year low and a perennial question from investors is what will it take to reverse this trend?"
Zijin Mining Group Co. Ltd., a Chinese producer of gold, copper, zinc and other mineral resources, continues to have the highest implied upside among mining stocks. The company had a 29.8% upside to analysts' price targets as of Dec. 6. Zijin generated a total one-year return of 7.8% Zijin's buy strength is 100%, a measure determined by dividing the total number of buy and overweight recommendations from analysts by the number of recommendations available.
Other global mining companies with an implied upside greater than 20% were Vale SA, Glencore PLC, Wheaton Precious Metals Corp., PJSC Polyus and Shandong Gold Mining Co. Ltd.
Of the top companies by market capitalization, Australian iron ore miner Fortescue Metals Group Ltd. and Anglo American Platinum Ltd. have the largest potential downside with stock prices trading 14.3% and 13.4%, respectively, higher than analysts' price targets. Fortescue and Anglo American Platinum had a one-year total return of 183.9% and 165.1%, respectively. Other companies reporting a negative upside to analysts' price targets were China Molybdenum Co. Ltd., Southern Copper Corp., BHP Group and Antofagasta PLC.