Tag: Motley Fool Australia

ASX growth shares are having a bumper year.

While many dividend shares have been hammered, growth shares like Afterpay Ltd (ASX: APT) have continued to climb.

I think part of this can be put down to the dividend uncertainty. Investors are happy to take the promise of growth tomorrow compared to buying a dividend share that won’t pay out anything today.

That’s good news for ASX growth shares across a number of sectors. The tech sector has done well and buy now, pay later is surging higher.

However, I’ve got my eye on Nextdc Ltd (ASX: NXT) and one other top ASX growth share in the August earnings season.

Why I’m watching Nextdc and one more ASX growth share

I think the Aussie share market is a bit like a tight sporting contest right now. You don’t quite know who will win and you just can’t look away.

One ASX growth share that I can’t take my eye off is Nextdc. The Nextdc share price has had a bullish run in 2020 and is up 83.3% to $11.97 per share.

That’s an impressive performance, particularly when you consider the impact of the coronavirus pandemic on the S&P/ASX 200 Index (ASX: XJO).

While the benchmark index slumped in the March bear market, Nextdc shares were one of the standout performers.

I have high expectations for the company’s full-year earnings result. Nextdc posted a strong half-year result but I think the growth outlook could be even better in August.

We’ve seen strong demand for data storage and security services in 2020. A rise in sophisticated cyber-attacks and a shift to remote working have accelerated this growth for Nextdc.

There’s no set date for that earnings release yet but Nextdc reported its FY19 earnings on 29 August, so it may be a few weeks away.

I’ve also got my eye on A2 Milk Company Ltd (ASX: A2M) in August. The ASX growth share has climbed 39.8% this year and is trading just shy of its all-time high.

To many, that could mean that A2 Milk is overvalued. However, I think a strong earnings profile underpinned by growing supermarket sales is the key.

The company is also continuing to pursue its international expansion of the brand into Canada.

Demand for A2 products out of Asia is robust which could generate the cash flow needed to realise its potential future growth.

I think A2 Milk is one of those ASX growth shares that’s worth watching this month. The Kiwi dairy group is set to announce its FY20 earnings on 19 August.

Foolish takeaway

These are just a couple of the top ASX growth shares I’m watching this month.

Given the strong share price growth in other sectors like tech, I’m sure we’re in for an eye-opening reporting season this month.

More reading

• Will the Domino’s share price continue to surge in August?
• Nick Scali share price bolstered by strong outlook and dividend upgrade
• Up 21% in a month, is the Northern Star share price a buy?
• Is the BHP share price a good coronavirus hedge?
• 5 things to watch on the ASX 200 on Thursday

Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of A2 Milk and AFTERPAY T FPO. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post Overvalued or a strong buy? Nextdc and 1 more ASX growth share to watch appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/39X0rVw

Later this month all eyes will be on the Woolworths Group Ltd (ASX: WOW) share price when it releases its full year results.

The conglomerate is scheduled to release its results on 27 August 2020.

Ahead of the release, I thought I would look to see what the market is expecting from the company.

What should you expect from the Woolworths full year result?

According to a note out of Goldman Sachs, it is expecting the conglomerate to record solid growth in sales in FY 2020.

For the 12 months ended 30 June 2020, the broker expects Woolworths to record a 5.9% year on year increase in sales to $63.52 billion.

A key driver of this growth is expected to be a very strong increase in Australian Food sales during the year. Its analysts expect the segment to report comparable store sales growth of 7.2%, bringing its total sales to $41,878.5 million.

Goldman believes that its Big W, NZ Supermarkets, and Endeavour Drinks businesses will be supporting this growth. It is forecasting sales growth of 8.9% for NZ Supermarkets, 8.6% for Endeavour Drinks, and 7.2% for Big W.

While these businesses are benefiting from the pandemic, its Hotels business has been impacted greatly due to closures. As a result, the broker is forecasting a 21.5% decline in Hotels sales to $1,311.6 million in FY 2020.

What about its earnings?

Unlike rival Coles Group Ltd (ASX: COL), Goldman Sachs isn’t expecting Woolworths’ profits to grow in FY 2020. This is due partly to additional COVID related costs and also its new enterprise agreement.

The broker has pencilled in a 2.6% increase in Australian Food segment earnings before interest and tax (EBIT) to $1,905.6 million on a pre-AASB16 basis. On a post-AASB16 basis, Australian Food EBIT is expected to be $2,198.4 million.

And although solid EBIT growth is also expected from Endeavour Drinks and NZ Supermarkets, and the Big W brand is expected to become profitable at long last, a sharp decline in Hotels EBIT is expected to weigh on its profit result.

Goldman expects Woolworths’ underlying net profit after tax to be at $1,572.7 million, or $1,699 million on a pre-AASB16 basis. This represents a 3.1% year on year decline.

More reading

• 4 coronavirus-resistant blue chip ASX shares
• ASX shares that could get a boost from Victoria’s shutdown
• ASX 200 jumps 2% higher, Afterpay soars
• Woolworths provides update on the impact of COVID-19 restrictions
• 3 high quality blue chip ASX 200 shares to buy

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of COLESGROUP DEF SET and Woolworths Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post Earnings preview: What to expect from the Woolworths FY 2020 result appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/3gxfZSr

The ResMed Inc. (ASX: RMD) share price is dropping lower on Thursday morning following the release of its fourth quarter and full year update.

At the time of writing the sleep treatment-focused medical device company’s shares are down 4% to $26.82.

How did ResMed perform in the fourth quarter?

For the three months ended 30 June 2020, ResMed delivered a 10% constant currency increase in revenue to US$770.3 million. This compares to the analyst consensus estimate of US$752 million.

A key driver of this growth was its Europe, Asia, and Other business, which delivered a 22% increase in revenue during the quarter. Management advised that this was primarily driven by sales across its device product portfolio, including increased demand for ventilators due to COVID-19.

The U.S., Canada, and Latin America business grew revenue by 4% during the quarter. This was thanks to strong sales across its mask product portfolio and increased demand for ventilators. This offset softer than expected mask sales during the period.

Finally, the fledgling Software as a Service business was on form and achieved a 7% increase in revenue. This was due to continued growth in resupply service offerings and stabilising patient flow in out-of-hospital care settings.

This led to the company reporting full year FY 2020 revenue of US$2,957 million, up 15% year on year in constant currency.

What about its earnings?

ResMed reported a further increase in its gross margin during the fourth quarter. It increased 60 basis points to 59.9%, which underpinned a 24% increase in quarterly operating profit to US$243.4 million and a 40% lift in quarterly net income to US$193.3 million.

For the full year, the company’s operating profit grew 24% to US$890.9 million and net income lifted 32% to US$692.8 million.

ResMed’s CEO, Mick Farrell, commented: “Our fourth quarter results reflect the strength and resiliency of our business in today’s uncertain environment. We finished fiscal year 2020 with double-digit revenue growth to US$3.0 billion and operating profit up 24% on a non-GAAP basis.”

 “Throughout our fiscal fourth quarter, we continued to support the COVID-19 pandemic response through increased manufacturing of our ventilators, including bilevels, and ventilation mask systems while also supporting our customers with digital health solutions and other innovative tools to enable remote care for patients,” he added.

Outlook.

Mr Farrell appears cautious optimistic on the company’s prospects in FY 2021.

He said: “Looking ahead, we are confident in our ability to navigate through the ongoing challenging clinical and economic environment to deliver for all our stakeholders. Sleep labs and physician practices are reopening across many geographies, and we’re seeing accelerated adoption of digital health solutions which supports our long-term strategy.”

“We remain vigilant and thoughtful about the outlook for our business as we continue to serve our customers, and we believe our strong foundation will accelerate our growth over the longer term,” he concluded.

More reading

• 5 things to watch on the ASX 200 on Thursday
• ResMed and 1 other 5-star ASX 200 share to buy in August
• This is the only ASX sector tipped to report earnings growth this reporting season
• Why I would buy NEXTDC and these stellar ASX growth shares
• 7 ASX shares to watch this reporting season

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended ResMed Inc. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post ResMed share price lower despite delivering strong growth in FY 2020 appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/2DxWURj

2020 hasn’t been a great year for many ASX real estate investment trusts (REITs). The coronavirus pandemic has hurt earnings across a broad range of real estate sectors including office, commercial and retail. However, National Storage REIT (ASX: NSR) shares are one of the few to climb higher this year. Despite its recent gains, is the National Storage share price still a buy?

Why is the National Storage share price doing well?

National Storage provides tailored storage solutions across Australia with a focus on self-storage units.

The Aussie REIT was subject to several takeover bids earlier this year. These included offers at $2.20 to $2.40 per share from China-based Gaw Capital Partners, as well as United States-based Warburg Pincus and Public Storage.

However, the pandemic uncertainty hit in February and all three bidders withdrew from the race.

That saw the National Storage share price plummet to as low as $1.23 per share in the midst of the March bear market.

Things have been reasonably solid since then. Shares in the Aussie self-storage REIT have climbed 51.2% higher since March and are trading at $1.86 per share.

So, how does the National Storage share price stack up against its fellow REITs in August?

Should you buy National Storage shares?

I personally think National Storage is in a better position than many ASX REITs right now.

There are question marks over current property valuations in the retail, commercial and office sectors. That’s largely due to shifting consumer and worker behaviour resulting from the pandemic.

That’s why shares like Scentre Group (ASX: SCG) and Stockland Corporation Ltd (ASX: SGP) are trading at steep discounts.

Retail tenants are likely to struggle from lower foot traffic while arguably demand for bricks and mortar leases will be subdued.

In contrast, now could be a good time for National Storage’s earnings.

Tough economic times can often see people moving homes as they look to downsize or otherwise relocate.

That means demand for self-storage units could be set to surge if we see stress in the residential property market.

Foolish takeaway

The National Storage share price fell 1.3% lower yesterday but I think it could be a solid buy.

As an REIT, I wouldn’t expect huge share price growth. However, non-cyclical earnings and a price-to-earnings (P/E) ratio of just 5.1 could mean it’s on the buy list.

More reading

• Super Retail and 2 other ASX retail shares to watch in August
• Reliable ASX dividend shares still exist
• 2 ASX shares to buy and 2 to avoid as deflation bites
• Top brokers name 3 ASX shares to sell next week
• Value stocks to rise on strong A$ and broker picks the cheapest ASX stocks to buy today

Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Scentre Group. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post Is the National Storage share price a buy in August? appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/3i7AqW8

Will pizza be the key to outperformance in August?

Judging by the Domino’s Pizza Enterprises Ltd (ASX: DMP) share price gains, that could be the case.

Domino’s shares are up 5.0% in the last month while the S&P/ASX 200 Index (ASX: XJO) has edged 0.2% lower.

Why the Domino’s share price is soaring

There have been no major announcements from the Aussie food company since mid-April. However, that hasn’t stopped the Domino’s share price continuing to climb.

One big factor has been Domino’s ability to continue operating despite coronavirus restrictions.

Investors seem to be pricing in resilient future earnings, with Domino’s shares jumping 40.2% to $75.52. In fact, Domino’s is currently trading just 1.7% behind its 52-week high.

I think strong momentum and a lack of announcements make the company’s August earnings result one worth watching.

It’s been a long time since we’ve got an insight into Domino’s financials and operations. That means the August 19 full-year result could help re-calibrate expectations for the Domino’s share price.

Is the Domino’s share price a buy?

I think the Victorian lockdown could be good for Domino’s earnings. There are tight restrictions in stage 4 but food delivery is not one of them.

That means Domino’s earnings could be resilient despite economic hardship in many industries.

I also think it’s in a better position than many ASX 200 shares to pay dividends in the near future.

The one concern I would have is the lofty valuation. Domino’s shares trade at a price-to-earnings (P/E) ratio of 49.1 and just shy of its 52-week high.

That means you’re investing a lot of money for little immediate return. If you believe in the long-term growth story, that may not be a huge concern.

However, value investors may be turned off buying Domino’s shares.

Foolish takeaway

The Domino’s share price has had a strong year but I’m not sure the company’s shares are particularly cheap.

If you’re willing to wait, I think the August earnings result could provide a good reset point for the ASX share’s fair valuation.

More reading

• Overvalued or a strong buy? Nextdc and 1 more ASX growth share to watch
• Nick Scali share price bolstered by strong outlook and dividend upgrade
• Up 21% in a month, is the Northern Star share price a buy?
• Is the BHP share price a good coronavirus hedge?
• 5 things to watch on the ASX 200 on Thursday

Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Domino’s Pizza Enterprises Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post Will the Domino’s share price continue to surge in August? appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/3i4QLLs

Mesoblast Limited (ASX: MSB) shares have surged more than 30% in the past month. Despite this, I believe the Mesoblast share price is poised to go higher. Around nine years ago, the company was part of the S&P/ASX 200 Index (INDEXASX: XJO) and was trading around $9 with a market capitalisation of $2.5 billion at its peak.

Since then, the Mesoblast share price has struggled to gain any traction and was eventually dropped out of the Index. However, since late-March, the Mesoblast share price has surged more than 314% on the back of a potential treatment for COVID-19, which has seen the company re-join the ASX 200 Index. So, is Mesoblast finally going to become a biotech giant and is now the time to invest?

What is fuelling the Mesoblast share price?

Mesoblast is a world leader in developing regenerative medicines for inflammatory diseases. The company made headlines in April after it announced promising results for its Remestemcel-L (Ryonsil) treatment for COVID-19.

According to Mesoblast, Ryonsil is design to counteract the inflammatory process induced by COVID-19 by neutralising inflammation. The product is currently undergoing Phase 3 trials in the United States on COVID-19 patients with acute respiratory distress syndrome.

Ryoncil is already in a number of other clinical trials targeted at reducing inflammatory conditions in patients with steroid-refractory acute graft versus host disease (SR-aGVHD).

What is the outlook for Mesoblast?

There are two important catalysts in the near future that could send the Mesoblast share price soaring. The first is the interim analysis of Ryoncil’s Phase 3 trials in ventilator dependent COVID-19 patients. The Data Safety Monitoring Board (DSMB) has set a date in early September to review the data and will inform Mesoblast on whether further trials should proceed.

The second catalyst is closer and pertains to Ryoncil’s use in treating children with SR-aGVHD. The company is scheduled to meet with the US Food and Drug Administration (FDA) on 13 August. I’ll be keeping a close eye on the Mesoblast share price at this time.

Should you buy?

Mesoblast released its activities report for the fourth quarter in late July. This saw the company end the quarter with US$129.3 million in cash and net operating cashflow of US$2 million. Mesoblast completed a US$90 million capital raising in May and is well positioned to scale-up manufacturing of its products.

Despite the catalysts that could send the Mesoblast share price soaring, I don’t think it would be prudent to jump ahead and buy shares in the company hoping for positive results. Although there may be promising data, investors need to factor in the risk that Mesoblast’s clinical trials fail to reach their endpoint. However, if the company achieves regulatory approval and can manufacture its products at a cost-effective price, it could become a biotech giant.

More reading

• Why Mesoblast, Northern Star, PointsBet, & Splitit shares are racing higher
• ASX 200 down 1.15%: NAB downgraded, Telstra asset sale, gold miners rocket
• These ASX shares are actively fighting coronavirus
• Here’s how to start investing with $5k
• Why this broker thinks Mesoblast shares are a strong buy

Motley Fool contributor Nikhil Gangaram has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post Is the Mesoblast share price a sleeping biotech giant? appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/3fujkjD

It’s been a good year for the Newcrest Mining Limited (ASX: NCM) share price.

Shares in the Aussie gold miner have rocketed 22.8% but many think it could be headed higher.

Global gold prices have smashed the US$2,000 per ounce barrier and continue to reach new record highs.  Fears over coronavirus and rising inflation have driven the precious metal’s recent rise.

That’s good news for ASX gold shares like Newcrest and Saracen Mineral Holdings Limited (ASX: SAR).

But can the Newcrest share price beat it’s current 52-week high and continue climbing in 2020?

Why one leading fundie likes the Newcrest share price

Fund manager Tribeca Global Natural Resources Ltd (ASX: TGF) is certainly bullish on the ASX gold share.

That’s according to an article in the Australian Financial Review (AFR) quoting Tribeca’s head of research, Todd Warren.

Mr Warren touched on many of the big themes driving gold prices higher. That includes the strong money supply and government stimulus, as well as a prolonged period of low interest rates.

According to the article, Tribeca is bullish on the Newcrest share price with some “exciting results” out of an exploration prospect.

There are other ASX gold shares on the investment manager’s buy list. That includes Saracen shares after the miner’s Super Pit acquisition late last year.

That asset, joint-owned with Northern Star Resources Ltd (ASX: NST), could prove to be a masterstroke.

With gold prices rocketing past US$2,000 per ounce, Saracen may have purchased that stake for an absolute steal.

Tribeca believes the Aussie miner can “strip out costs” from the Kalgoorlie site and generate strong returns.

Should you buy ASX gold shares?

The Newcrest share price currently trades at a price-to-earnings (P/E) ratio of 36.1. That’s certainly cheaper than the 44.9 multiple that Saracen shares currently trade at.

Clearly, Tribeca and other leading fundies are bullish on ASX gold shares like Newcrest.

I personally won’t be buying in, but I can see the appeal for tactical investors. I think a small allocation to gold shares could be a good hedge in the current market.

However, other companies with defensive earnings like Coles Group Ltd (ASX: COL) could also help protect against the downside this year.

More reading

• Up 21% in a month, is the Northern Star share price a buy?
• 5 things to watch on the ASX 200 on Thursday
• Gold hits new high – here are 3 ASX gold shares set to benefit
• ASX 200 down 1.15%: NAB downgraded, Telstra asset sale, gold miners rocket
• Leading fundie says the ASX gold share boom is just beginning

Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of COLESGROUP DEF SET. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post Why this leading fundie likes the Newcrest share price appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/3kfdbLO

Who said recessions are bad for retailers? The Nick Scali Limited (ASX: NCK) share price could be set to jump after it posted a positive profit report and predicted better times ahead.

While the furniture retailer posted a 2.1% dip in FY20 revenue to $262.5 million, it managed to lift its earnings before interest and tax by 1.7% to $60.8 million as net profit was steady at $42.1 million.

That’s a good result in this COVID-19 stricken environment, although that’s not the most exciting pieces of news.

Profit and dividend upgrade

Management is forecasting first half FY21 profit “to be up by at least 50-60%” compared to the same time last year and it increased its final dividend by 12.5% to 22.5 cents per share.

The dividend lift is unusual for this reporting season. UBS described this period succinctly when it coined the term “dividend recession”. Many ASX stocks, such as big banks like Commonwealth Bank of Australia (ASX: CBA), will be slicing their payouts due to the pandemic.

COVID boost to sales

The COVID-19 lockdown probably helped Nick Scali. Demand for home furnishings got a boost with stuck-at-home consumers taking the opportunity to refresh their dwellings.

“During the temporary closure of the Company’s stores in April, the online store was launched across all product categories and achieved greater than $3m in sales orders for the quarter,” said the company in its ASX statement.

“The online store positively contributed to EBIT in the first quarter of operation.”

Cost control pads margins

But what’s also impressive is the group’s cost control. The weaker Australian dollar puts pressure on the retailer’s bottom line as it imports its goods from overseas and pays in US dollars.

The impact of the exchange rate can be seen on its skinnier gross margin, but management’s cost cutting in a difficult environment more than offset this.

This allowed its EBIT margin to expand by 90 basis points to 23.2% in FY20 over the previous financial year.

It’s operating cash flow also recorded an impressive 22.6% jump to $75.4 million and its order book is brimming.

Big order book

“Contrary to the decline in sales revenue, written orders grew by 9% with same store sales orders up 4%,” added Nick Scali.

“Following the temporary closure of Australian stores for most of April, and up until mid-May in New Zealand, May and June sales orders grew by 72% year on year.”

Around 65% of the company’s products, like sofas, are made to order and takes between 9 weeks and 13 weeks for delivery.

Nick Scali scaling the fiscal cliff

The big surge in orders before June 30 means Nick Scali will book the sales and profits in the current quarter – contributing to management’s bullish profit guidance for the current half.

The way profits are booked could help Nick Scali manage the so-called “fiscal cliff” facing the sector. This cliff refers to the gradual or full withdrawal of support measures from October.

Other retailers like Harvey Norman Holdings Limited (ASX: HVN) and Wesfarmers Ltd (ASX: WES) are also expected to post strong FY20 results. But their outlook could be more sombre.

More reading

• Overvalued or a strong buy? Nextdc and 1 more ASX growth share to watch
• Will the Domino’s share price continue to surge in August?
• Up 21% in a month, is the Northern Star share price a buy?
• Is the BHP share price a good coronavirus hedge?
• Why I would buy CBA and this ASX dividend share

Motley Fool contributor Brendon Lau owns shares of Commonwealth Bank of Australia. Connect with me on Twitter @brenlau.

The Motley Fool Australia owns shares of Wesfarmers Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post Nick Scali share price bolstered by strong outlook and dividend upgrade appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/3gx8bA7

ASX gold shares. They’re arguably the hottest thing on the market right now except for maybe tech shares. One of those leading the pack is Northern Star Resources Ltd (ASX: NST). In fact, the Northern Star share price has surged 20.8% in the last month.

So, how does Northern Star compare to its peers and is it still in the buy zone?

Why the Northern Star share price has gone up

One huge factor has been the bearishness in global share markets.

Investors have been on edge ever since the March bear market. While the S&P/ASX 200 Index (ASX: XJO) has bounced back strongly, there are still lingering concerns.

Those fears have been heightened amid the Victorian lockdown and the looming August earnings season.

That has pushed global gold prices to a new record high and the Northern Star share price has climbed with it.

In fact, ASX gold shares are continuing to climb. Low-interest rates and a weakening US dollar are continuing to fuel demand with a potentially bullish outlook ahead.

How does Northern Star compare to its peers?

Let’s take a look at the numbers and see if there’s any relative value in the Northern Star share price.

Northern Star trades at a price-to-earnings (P/E) ratio of 53.5 with a market capitalisation of $12.2 billion.

On first glance, that looks to be quite expensive for an ASX gold share.

The Saracen Mineral Holdings Limited (ASX: SAR) share price has also been outperforming. In fact, Saracen shares have rocketed 81.3% higher this year to a market capitalisation of $6.6 billion.

Saracen shares trade at a P/E ratio of 44.9, while St Barbara Ltd (ASX: SBM) shares have a lower 21.2 multiple.

One thing to keep in mind is the huge resources that both Northern Star and Saracen have to work with. That includes the joint ownership of the Kalgoorlie Super Pit gold mine which has massively boosted production.

Foolish takeaway

Despite how bullish the market is on ASX gold shares, I don’t think the Northern Star share price is a buy.

There’s no sign of inflation in the short-term which could hamper global gold prices’ future growth. While market volatility may continue, I’m not sure gold will continue to surge.

Add to that a relatively expensive P/E ratio and I don’t think it’s a compelling buy in the current market.

More reading

• Overvalued or a strong buy? Nextdc and 1 more ASX growth share to watch
• Will the Domino’s share price continue to surge in August?
• Why this leading fundie likes the Newcrest share price
• Nick Scali share price bolstered by strong outlook and dividend upgrade
• Is the BHP share price a good coronavirus hedge?

Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post Up 21% in a month, is the Northern Star share price a buy? appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/2XrRsXl

Iron ore producer and explorer, Fortescue Metals Group Limited’s (ASX: FMG), shares gained 25.7% in July. The rising Fortescue share price placed the company near the top of July’s best gainers on the S&P/ASX 200 (INDEXASX: XJO).

And the Fortescue share price has continued its run higher in August. In the first three trading days of this month, the company’s share price is up another 5.4%. That brings Fortescue’s year-to-date share price gain to 69.8%. Since its 9 March low, the share price is up almost 112%.

These are the kinds of gains resource investors might normally expect from a risky, small-cap mining share reporting a big resource discovery. But with a market capitalisation of $56.4 billion, Fortescue is anything but small.

While Fortescue’s share price has gained nearly 70% so far in 2020, the ASX 200 — down 0.6% yesterday — has lost more than 10%.

What does Fortescue do?

Fortescue is an iron ore production and exploration company. With core assets located in the Western Australia’s Pilbara region, Fortescue first publicly listed in 1987. It now ranks as the fourth largest iron ore producer in the world.

The company owns and operates integrated operations spanning two iron ore mine hubs; the five-berth Herb Elliott Port and Judith Street Harbour towage facility in Port Hedland and the fastest heavy haul railway in the world.

Why is Fortescue’s share price soaring higher?

Fortescue’s share price has benefited from the high iron ore price, currently still well above US$100, at US$105.59 per tonne.

Fortescue share holders have also benefited from the production slowdowns of one of the company’s chief rivals, Brazil’s Vale SA (NYSE: VALE). Vale saw a big fall in its iron ore production, as Brazil struggled to control the nation’s COVID-19 outbreak.

On the other end of the globe, China — the world’s biggest importer of iron ore — has been recovering from its own virus-related slowdowns. With China’s demand for steel — and thus iron ore — forecast to remain strong, I expect Fortescue’s share price to continue performing well.

Indeed, Fortescue shares have performed strongly into August, buoyed by the company’s fourth quarter report. The report revealed it had beaten its financial year iron ore estimates, revealing the company had, “Record iron ore shipments of 47.3 million tonnes (mt) for the quarter and 178.2 mt for FY20, exceeding the top end of guidance of 177 mt and 6% higher than FY19.”

More reading

• Why Crown, Fortescue, Kogan, & Nearmap shares are storming higher
• The Fortescue Metals share price just hit a new record high
• These were the best performing ASX 200 shares in July
• These were the worst performing ASX 200 shares in July
• Top brokers name 3 ASX shares to sell next week

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post Why the Fortescue share price gained 26% in July and is still running strong appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/2DxPI7L