Key points
Investors are still concerned about the possibility of sanctions following the Russian invasion of Ukraine
2021 Q4 gold sales increased by 15%, year on year
Total gold production for the 2021 calendar year declined by 18% compared to 2020
Operating exclusively in Russia, Petropavlovsk (LSE:POG) is a gold mining company. The firm has hit headlines over the past fortnight because of the ongoing military situation between Russia and Ukraine. Shares are currently trading at 3.45p, up nearly 50% today. With the POG share price down 90% in the past year, however, should I be adding this business to my portfolio? Let’s take a closer look.
Recent activity and the POG share price
Given that Petropavlovsk exclusively operates in Russia, investors have been concerned about the company ever since the Russian invasion of Ukraine. In the last month, for instance, the share price fell 83%, while over the past week it is down 70%. This price movement has been troubling to watch.
The main worry is that sanctions could target the firm. This would likely make trading very difficult. In addition, it would limit the client base to which it could sell its gold. Until now, however, no sanctions have targeted the business.
On the other hand, we may soon see a ceasefire agreed. The situation could improve markedly, not only for the civilians, but also for the POG share price. In the meantime, however, the situation remains very uncertain and that is not attractive to me, a potential shareholder.
Company results
The firm recently released a production and sales report for the 2021 calendar year and Q4 2021. For Q4, total gold production increased 26% year on year, while own-mined gold production rose by 53%. Furthermore, gold sales for this period increased by 15%, year on year.
For the full year, however, the story is not as positive. Total gold production for 2021 was down 18% compared with 2020, although own-mined gold production grew by 1%. Also, gold sales for the 2021 calendar year fell by 20%.
In addition, the company’s cash balance in 2021 Q4 declined by about $10m since the previous quarter. On the flip side, the firm reduced its debt by $2m over the same time period.
With a trailing price-to-earnings (P/E) ratio of 12.85, this is lower than the 19.79 for Barrick Gold, a major competitor in the gold market. While this may indicate that Petropavlovsk is undervalued at the current share price, recent results aren’t particularly exciting. What’s more, the firm is subject to governance issues from $300m of transactions involving potential conflicts of interest.
The company has been caught up in the investor exodus from firms operating in Russia. As the situation continues to be uncertain, I won’t be going anywhere near this business for the moment, regardless of the low P/E ratio. I will be waiting to gain a better understanding of where the Ukraine conflict is headed, while watching for further results. I prefer to give the current POG share price a miss.
The post Is the Petropavlovsk (POG) share price now too cheap to miss? appeared first on The Motley Fool UK.
FREE REPORT: Why this £5 stock could be set to surge
Are you on the lookout for UK growth stocks?
If so, get this FREE no-strings report now.
While it’s available: you’ll discover what we think is a top growth stock for the decade ahead.
And the performance of this company really is stunning.
In 2019, it returned £150million to shareholders through buybacks and dividends.
We believe its financial position is about as solid as anything we’ve seen.
Since 2016, annual revenues increased 31%
In March 2020, one of its senior directors LOADED UP on 25,000 shares – a position worth £90,259
Operating cash flow is up 47%. (Even its operating margins are rising every year!)
Quite simply, we believe it’s a fantastic Foolish growth pick.
What’s more, it deserves your attention today.
So please don’t wait another moment.
Get the full details on this £5 stock now – while your report is free.
More reading
Stocks to buy now: an under-the-radar winner that’s quietly dominating its industry
At a cheap share price, is Petrofac a buy with my spare £1,000?
3 UK stocks to beat rampant inflation
The best Warren Buffett stocks to buy with £250 right now
Buy the dip: 5 stocks to buy today and hold for the next 5 years
Andrew Woods has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
