You are absolutely right from a long term perspective.
What would be an appropriate net profit margin on $1.4 billion of sales?
If we take a conservative 20% then net profit is $280 million. Applying again a conservatibe PE ratio of 10 we get a market cap of $2.8 billion so much more than 100% upside from here.
I say that a PE of 10 is conservative as AGO has the possibility of further doubling production from the 12 million tonnes and the calculations do not factor in Ridley and Balla Balla. This could well be a multibagger over the next 3 years and at much less risk than some of the junior explorers that so many people get into.
I will not be selling out anytime soon. As for the delay on Ridley, call me old fashioned but I would rather wait and get the best possible price for my assets rather than push for completion just to prove to a market overrun by short term traders that I can meet transaction target dates. Even better if I can package Ridley and Balla Balla together and make a killing after the merger is complete.
BR Max
AGO Price at posting:
$2.78 Sentiment: LT Buy Disclosure: Held
