Calculating steady devalue of TV as zinc rises
many have observed that , for the past year the price movements of TV have basically mirrored Zn. That's obvious. Not only that but lately thenprice of TV shares has directly matched the price of a lb of Zn. Kind of a weird coincidence and obvious pattern too. But is this a "fair" valuation? No! The price of TV should rise at least 2 -2.2 cents with each cent Zn rises over the analysts model assumptions. . If the analyst models are correct in valuing TV at roughly 2.25 per share at 1.40-1.45 zn ... then TV should be trading at 2.25 + .30 = 2.55 this am. So TV is hugely undervalueed at current prices and becoming more so every day that it tracks Zn price cent by cent on the rise Here's how i come up with the .02 TV increase for each .01 Zn rise: I think we cam all agree that, at this price point every penny zn rises is pure profit after taxes. The smelters get no price participation on the rise in Zn price so the only cost against the extra revenue is taxes. TV's guidance for 2018 is roughly 420 M lbs. Each cent per lb rise = $ 4.2 M of profit. Take 30% off for tax and tou have 3M in extra earnings over the analyst asdumption / model. price. With 825 M outstanding shares and a PE ratio assumption of 6X ... that = an additional .022 EPS for each .01 Zn goes up. When will the market realize that, not only is TV a great deal at this price ... its getting cheaper and becoming better value every X Zn goes up? Kind of baffles me why its not trading at $2 at least . I think the sub $4-5 price keeps a lot of big funds out by policy. This affects volume negatively. Which is why i'm a big advocate of share buy backs with FCF for this Co ! If TV could use FCF over the next 2 years to take the share float down to 500M shares .. that act alone would double the sp all by itself. Combined with good fin results ... that would push the sp past the magic $4-5 price point where the bigs can join in and THEN we'd have volumes that garner proper sp valuations.