A-Mark Precious Metals Inc

A-Mark Precious Metals Inc (NASDAQ: AMRK) is a US-listed precious metal trading Company. The Company is also a wholesaler of palladium bullion, platinum, silver, gold and other related products.

Investment Highlights - A-Mark Precious Metals Inc – Speculative Buy at USD 30.35

• The Company has delivered significant growth in financial performance for H1 FY2021 and is making strategic investments to expand direct sales.
• In the last one year, the Company delivered a significant return of ~276.52 and delivered higher returns compared to the benchmark Index.
• As per valuation metrics, Price/Cash Flow and Price/Earnings multiples of the A-Mark Precious Metals Inc are currently lower as compared to the corresponding multiples of the Textiles & Apparel industry. It reflects, shares are undervalued as compared to the industry.
• From the technical standpoint, 14-day RSI is in oversold zone and is currently supporting an upside move (around 44 level), which means the stock price could increase in the short term.

Key Risks

• Any change in regulations and government policies could affect the overall business of the Company.
• The Company is exposed to several operational risks associated with geological and weather conditions.

Financial Highlights – Q2 and H1 FY2021 (31 December 2020) (released on 9 February 2021)

(Source: Quarterly Report, Company Website)

• In the second quarter and first half of the financial year 2021, driven by higher volumes of gold and silver sold and higher average selling price of gold and silver, the revenue increased by 44% and 33%, respectively.
• The profitability margins for the period increased during the period, reflecting higher revenue and lower interest expenses incurred.
• The cash balance as on 31 December 2020 declined to $14,922 thousand (30 June 2020: $52,325 thousand).

One Year Share Price Chart

(Source: Refinitiv, chart created by Kalkine Group)

Valuation Methodology: Price/Earnings Approach (NTM) (Illustrative)

Conclusion

The Company has shown a significant improvement in the second quarter and the first half of the financial year 2021. Both the top-line and the bottom-line performance improved, with higher profitability margins. AMRK was benefited by higher volumes sold and higher average selling price. The liquidity position of the Company declined, while reported a well-positioned balance sheet. The Company has a diverse and consistent revenue streams in a normal trading environment and outsized profitability during a volatile period, reflecting the strength of a unique business model. The Company continues to make investments to expand direct sales are well-positioned to take advantage of the present market conditions and drive future growth. The stock made a 52-week low and high of USD 7.04 and USD 37.55, respectively.

Based on the factors discussed above, we have given a “Speculative Buy” recommendation on A-Mark Precious Metals Inc at the closing price of USD 30.35 (as on 11 February 2021), with lower double-digit upside potential based on 6.11x Price/NTM Earnings (approx.) on FY21E earnings per share (approx.). 

*All forecasted figures and Peer information have been taken from Refinitiv, Thomson Reuters.

Disclaimer

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