Could this company really go the same way as Sirius Minerals?

With the share price of Sirius Minerals at rock bottom, could Evraz plc stock go the same way?

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

I believe mining shares are inherently dangerous for investors. When I study a mining company’s accounts, I conjure up images of oil and gold prospectors from the 19th century. The issue I have is that, although the process is now more scientific than years gone by, knowing exactly what lies beneath the ground is still a bit of a stab in the dark.

The risk to investors doesn’t end there. Once there is a degree of certainty about what the company is dealing with, there has to be a huge outlay of capital to install the infrastructure needed to extract the product from the ground. This is all before the company has generated any revenue, let alone reaching peak output. Money isn’t made, until long after the shovels hit the ground.

A similar story?

Look at Sirius Minerals. At its Woodsmith mine in the North Yorkshire Moors, it is sitting on a huge reserve of polyhalite. It hopes to build the world’s largest polyhalite mine, but without generating cash flow, it is having difficulty obtaining funding to get the mine running and hitting its target of 10 million tonnes per annum by 2024.

Should you invest £1,000 in Greggs Plc right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Greggs Plc made the list?

See the 6 stocks

The lack of funding, and therefore production, has seen the share price drop by over 85% in the past year. Investors are still waiting for an update from Sirius Minerals, after the company announced it has failed to get its Phase 2 financing off the ground. The company is running out of time, and investors are losing patience.

So what do I think of Evraz (LSE: EVR)?

Cheap, but are they worth it?

To start with, the Russian steelmaker looks very cheap. Over the past year, its price has dropped by 27%, making its price-to-earnings ratio just 4. On this valuation, it’s dividend yield is bonkers, at around 15%, skewed due to the recent slump in price.

In June, three directors and non-executive directors sold part of their stake in Evraz for over £86m. As well as this sell-off, Alexander Abramov also sold over £50m of his shares in March. Without an adequate explanation from the company, it’s understandable to see why smaller investors’ faith in the company is lacking.

For the directors, it was a good time to offload some stock and the share price over the past month alone has dropped by 17%. Part of this is due to a lack of demand in the market for steel, which accounts for a large proportion of profits for Evraz, along with declining prices for almost all major benchmarks.

With operations in Russia, investors may be concerned about government sanctions, but these are the least of my concerns. I have serious reservations about investing in this sector.

The ultra-high dividend and very low valuation may catch some investors’ eyes, but I would urge caution. I cannot say how low the stock will go, but with prices for its materials volatile across the market, and the shareholder dealings, I won’t be buying this stock.

But there are other promising opportunities in the stock market right now. In fact, here are:

5 stocks for trying to build wealth after 50

The cost of living crisis shows no signs of slowing… the conflict in the Middle East and Ukraine shows no sign of resolution, while the global economy could be teetering on the brink of recession.

Whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times. Yet despite the stock market’s recent gains, we think many shares still trade at a discount to their true value.

Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…

We’re sharing the names in a special FREE investing report that you can download today. We believe these stocks could be a great fit for any well-diversified portfolio with the goal of building wealth in your 50’s.

Claim your free copy now

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

T Sligo 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.

Like buying £1 for 51p

This seems ridiculous, but we almost never see shares looking this cheap. Yet this recent ‘Best Buy Now’ has a price/book ratio of 0.51. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 51p they invest!

Of course, this is the stock market where money is always at risk — these valuations can change and there are no guarantees. But some risks are a LOT more interesting than others, and at The Motley Fool we believe this company is amongst them.

What’s more, it currently boasts a stellar dividend yield of around 8.5%, and right now it’s possible for investors to jump aboard at near-historic lows. Want to get the name for yourself?

See the full investment case

More on Investing Articles

piggy bank, searching with binoculars
Investing Articles

An underrated value stock? I think investors should take a closer look

This value stock appears overlooked by the market. And that’s quite rare right now as the stock market recovers from…

Read more »

Young Black woman looking concerned while in front of her laptop
Investing Articles

Up 35% in a month! But is this electrifying UK growth share a total gamble?

Harvey Jones wishes he'd had a flutter on gaming group Entain last year, as it's now smashing the FTSE 100.…

Read more »

Investing Articles

Should I buy the most popular FTSE 100 stock on AJ Bell?

Our writer can see the appeal of this recently popular dividend stock from the FTSE 100 index. But will he…

Read more »

Cargo containers with European Union and British flags reflecting Brexit and restrictions in export and import
Investing Articles

UK shares are booming again as the FTSE recovers! Here’s what I’m watching

Mark Hartley takes a deep dive to see which UK shares are lagging behind in the current market rally. Has…

Read more »

Businessman hand flipping wooden block cube from 2024 to 2025 on coins
Investing Articles

I bought 1,779 Legal & General shares 2 years ago – see how much dividend income I’ve got since

Harvey Jones holds Legal & General shares and has been pretty underwhelmed by their performance so far. The dividend is…

Read more »

Middle-aged black male working at home desk
Investing Articles

Is the FTSE 100 set to soar? Here are 3 ways to aim to cash in

My outlook for the FTSE 100 is definitely brightening as we get deeper into 2025. How can we make the…

Read more »

Investing Articles

£10k invested in NatWest shares on the ‘Liberation Day’ dip is today worth…

Harvey Jones looks at how NatWest shares have been knocked off course during recent market turbulence, but are now bouncing…

Read more »

Tariffs and Global Economic Supply Chains
US Stock

£5,000 invested in Nvidia stock just before the tariff news is now worth…

Jon Smith talks through the erratic movements in Nvidia stock over the past six weeks and reveals where an investor…

Read more »