Should You Buy Hillgrove Resources Limited At This Share Price?

What happened to the HGO share price?

Hillgrove Resources Limited [ASX:HGO] has seen a strong rebound lately. With energy prices reaching a cyclical bottom, the market is slowly starting to put their bets on a revival in the commodity market. That means better days for commodity producers such as Hillgrove.

However, the current bottom may still stay with us for a little bit longer. Eventually the demand and supply rebalancing of the commodity market will work itself out, bringing a potentially slow recovery in price.

Of course, that means higher share prices for commodity producers.

What should you do with HGO shares now?

How did I uncover HGO? It came onto my radar in the latest study at Port Philip Publishing. In this study, we looked at some of the most ‘underrated’ stocks in the Australian stock market universe.

Hillgrove was perhaps the most ‘underrated’ stocks in the list. While the company is still receiving ‘buy’ ratings from analysts and brokers, it has had a poor track record in terms of earnings growth, liquidity and free cash flow.

I wouldn’t normally recommend investors to touch stocks that don’t have great financial health, but Hillgrove is precisely the kind of underrated stock that can give back in months to come.

What are some of the other underrated stocks on our list? Decmil Group [ASX:DCG] and Peet Ltd [PPC] are among our other highest rated stocks.

The most interesting relationship in our list of underrated stocks is the semi-strong inverse relationship between P/E ratio and dividend yield.

A cheaper P/E multiple actually leads to higher dividend yield for our list of mostly micro-cap and small-cap stocks.

If you want to get the full list and the analysis, click here.

Ken Wangdong

Emerging Market Analyst, New Frontier Investor

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