Karora Resources Inc (KRR.CA) Stock Fundamental Analysis

Canada • Toronto Stock Exchange • TSX:KRR • CA48575L2066

6.7 CAD

+0.16 (+2.45%)

Last: Aug 2, 2024, 07:00 PM

Fundamental Rating

We assign a fundamental rating of 7 out of 10 to KRR. KRR was compared to 820 industry peers in the Metals & Mining industry. KRR has outstanding health and profitabily ratings, belonging to the best of the industry. This is a solid base for any company. An interesting combination arises when we look at growth and value: KRR is growing strongly while it also seems undervalued. These ratings would make KRR suitable for value and growth and quality investing!

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1. Profitability

1.1 Basic Checks

KRR had positive earnings in the past year.
In the past year KRR had a positive cash flow from operations.
Of the past 5 years KRR 4 years were profitable.
KRR had a positive operating cash flow in each of the past 5 years.

1.2 Ratios

KRR's Return On Assets of 2.29% is amongst the best of the industry. KRR outperforms 89.24% of its industry peers.
With an excellent Return On Equity value of 3.78%, KRR belongs to the best of the industry, outperforming 89.86% of the companies in the same industry.
KRR has a better Return On Invested Capital (5.99%) than 94.49% of its industry peers.
Measured over the past 3 years, the Average Return On Invested Capital for KRR is significantly below the industry average of 12.04%.
The last Return On Invested Capital (5.99%) for KRR is above the 3 year average (5.90%), which is a sign of increasing profitability.

		Industry Rank	Sector Rank
ROA	2.29%
ROE	3.78%
ROIC	5.99%

ROA(3y)3.18%

ROA(5y)6.17%

ROE(3y)5.4%

ROE(5y)10.25%

ROIC(3y)5.9%

ROIC(5y)6.85%

1.3 Margins

KRR has a better Profit Margin (3.22%) than 92.12% of its industry peers.
In the last couple of years the Profit Margin of KRR has declined.
With an excellent Operating Margin value of 14.25%, KRR belongs to the best of the industry, outperforming 92.62% of the companies in the same industry.
KRR's Operating Margin has improved in the last couple of years.
KRR has a Gross Margin of 40.26%. This is amongst the best in the industry. KRR outperforms 94.87% of its industry peers.
In the last couple of years the Gross Margin of KRR has grown nicely.

		Industry Rank	Sector Rank
OM	14.25%
PM (TTM)	3.22%
GM	40.26%

OM growth 3Y-21.9%

OM growth 5Y4.75%

PM growth 3Y-61.26%

PM growth 5YN/A

GM growth 3Y-5.96%

GM growth 5Y7.74%

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ROA

ROE

ROIC

Operating and Profit Margin

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2. Health

2.1 Basic Checks

The Return on Invested Capital (ROIC) is below the Cost of Capital (WACC), so KRR is destroying value.
KRR has more shares outstanding than it did 1 year ago.
Compared to 1 year ago, KRR has a worse debt to assets ratio.

2.2 Solvency

KRR has an Altman-Z score of 4.00. This indicates that KRR is financially healthy and has little risk of bankruptcy at the moment.
With a decent Altman-Z score value of 4.00, KRR is doing good in the industry, outperforming 64.71% of the companies in the same industry.
KRR has a debt to FCF ratio of 1.63. This is a very positive value and a sign of high solvency as it would only need 1.63 years to pay back of all of its debts.
Looking at the Debt to FCF ratio, with a value of 1.63, KRR belongs to the top of the industry, outperforming 94.87% of the companies in the same industry.
KRR has a Debt/Equity ratio of 0.15. This is a healthy value indicating a solid balance between debt and equity.
Looking at the Debt to Equity ratio, with a value of 0.15, KRR is doing worse than 68.96% of the companies in the same industry.
Although KRR does not score too well on debt/equity it has very limited outstanding debt, which is well covered by the FCF. We will not put too much weight on the debt/equity number as it may be because of low equity, which could be a consequence of a share buyback program for instance. This needs to be investigated.

		Industry Rank	Sector Rank
Debt/Equity	0.15
Debt/FCF	1.63
Altman-Z	4

ROIC/WACC0.76

WACC7.85%

2.3 Liquidity

A Current Ratio of 1.79 indicates that KRR should not have too much problems paying its short term obligations.
KRR has a Current ratio (1.79) which is in line with its industry peers.
KRR has a Quick Ratio of 1.33. This is a normal value and indicates that KRR is financially healthy and should not expect problems in meeting its short term obligations.
KRR has a Quick ratio (1.33) which is comparable to the rest of the industry.
The current and quick ratio evaluation for KRR is rather negative, while it does have excellent solvency and profitability. These ratios do not necessarly indicate liquidity issues and need to be evaluated against the specifics of the business.

		Industry Rank	Sector Rank
Current Ratio	1.79
Quick Ratio	1.33

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WACC

Debt/Equity

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Altman-Z score

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3. Growth

3.1 Past

KRR shows a strong growth in Earnings Per Share. In the last year, the EPS has been growing by 66.67%, which is quite impressive.
The earnings per share for KRR have been decreasing by -56.65% on average. This is quite bad
The Revenue has grown by 24.81% in the past year. This is a very strong growth!
KRR shows a strong growth in Revenue. Measured over the last years, the Revenue has been growing by 26.45% yearly.

EPS 1Y (TTM)66.67%

EPS 3Y-56.65%

EPS 5YN/A

EPS Q2Q%133.33%

Revenue 1Y (TTM)24.81%

Revenue growth 3Y20.3%

Revenue growth 5Y26.45%

Sales Q2Q%19.35%

3.2 Future

KRR is expected to show a strong growth in Earnings Per Share. In the coming years, the EPS will grow by 60.52% yearly.
The Revenue is expected to grow by 19.87% on average over the next years. This is quite good.

EPS Next Y193.38%

EPS Next 2Y102.98%

EPS Next 3Y60.52%

EPS Next 5YN/A

Revenue Next Year38.22%

Revenue Next 2Y24.68%

Revenue Next 3Y19.87%

Revenue Next 5YN/A

3.3 Evolution

The EPS growth rate is accelerating: in the next years the growth will be better than in the last years.
The estimated forward Revenue growth is still strong, although it is decreasing when compared to the stronger growth in the past years.

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4. Valuation

4.1 Price/Earnings Ratio

A Price/Earnings ratio of 26.80 indicates a quite expensive valuation of KRR.
Based on the Price/Earnings ratio, KRR is valued cheaply inside the industry as 89.99% of the companies are valued more expensively.
The average S&P500 Price/Earnings ratio is at 28.39. KRR is around the same levels.
Based on the Price/Forward Earnings ratio of 7.74, the valuation of KRR can be described as very cheap.
Based on the Price/Forward Earnings ratio, KRR is valued cheaply inside the industry as 93.49% of the companies are valued more expensively.
The average S&P500 Price/Forward Earnings ratio is at 25.72. KRR is valued rather cheaply when compared to this.

		Industry Rank	Sector Rank
PE	26.8
Fwd PE	7.74

4.2 Price Multiples

KRR's Enterprise Value to EBITDA ratio is rather cheap when compared to the industry. KRR is cheaper than 91.24% of the companies in the same industry.
KRR's Price/Free Cash Flow ratio is rather cheap when compared to the industry. KRR is cheaper than 93.37% of the companies in the same industry.

		Industry Rank	Sector Rank
P/FCF	30.36
EV/EBITDA	8.95

4.3 Compensation for Growth

KRR's low PEG Ratio(NY), which compensates the Price/Earnings for growth, indicates a rather cheap valuation of the company.
The excellent profitability rating of KRR may justify a higher PE ratio.
A more expensive valuation may be justified as KRR's earnings are expected to grow with 60.52% in the coming years.