One of the cheapest stocks in our All Investable Deep Value Stock Screener is Alio Gold Inc (NYSEMKT:ALO).
Alio Gold Inc (Alio), formerly Timmins Gold Corp, is a Canada-based gold producer engaged in the operation, development, exploration and acquisition of resource properties in Mexico through its subsidiaries, Timmins Goldcorp Mexico, S.A. de C.V. and Molimentales del Noroeste, S.A. de C.V. (MdN). MdN owns the San Francisco Mine in Sonora, Mexico.
Alio is up almost 20% in the past five days but still remains undervalued. Here’s why.
A quick look at the company’s fundamentals shows that Alio has a market cap of $209 million. When you take a closer look at the balance sheet you will see that there is cash and cash equivalents of $39.2 million and just $1.8 million in short term debt. That equates to $37.4 million in net debt (cash minus debt). When you subtract the $37.4 million in net debt from the current market cap of $209 million that equates to an Enterprise Value of $171.6 million.
With operating earnings of $56 million (ttm) that means Alio is currently trading on an Acquirer’s Multiple of just 3.06 and a P/E of 3.92. What’s also noticeable is that the company generated $41.1 million in operating cash flow (ttm) and had $20.4 million in capex. That equates to a total of $20.7 million (ttm) in free cash flow and a FCF/EV yield of 12% (ttm).
In terms of the company’s financial strength. Alio has a F-Score of 7, a Z-Score of 6.54. and an M-Score of -4.11 so all good there. The company also maintains healthy trailing twelve month gross, operating, and net margins of 31%, 43%, and 37% respectively.
In short, Alio is a company with a very healthy balance sheet, it is financial sound with little debt and solid free cash flows. The company is trading on an Acquirer’s Multiple of 3.06, or 3.06 times operating earnings (ttm), a P/E of 3.92, and a FCF/EV yield of 12%. That’s why the stock remains undervalued in spite of the 19% increase over the past five days.
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