Should You Buy Gryphon FPO at This Price?

What happened to the GRY share price?

Gryphon FPO [ASX:GRY] is the gold mining exposure Aussie momentum investors have liked to have in recent weeks. However, today was the inevitable reversal that saw the wings of the markets clipped. Today’s loss was a small surprise to pay after the massive rally over the weeks.

Why did GRY shares do this?

Without a lot of market analysts covering the stock, GRY currently receives a consensus rating between ‘Hold’ and ‘Outperform’. The earnings outlook for the stock is negative in 2016, followed by a reduction in loss in 2017. The beta of the stock is 0.95, meaning it moves at a similar degree to the market. In terms of valuation, the company price to book multiples shows it is slightly more expensive than peers in the sector.

Over the last five years, the company actually scored 19.53% growth in revenue. Earnings have been better in the latest reporting period relative to last year. Over the five years, the company has been a net positive investor in capital spending.

The company is liquid, with low debt. However, the company still has a negative profit margin.

What now for GRY?

GRY is not exactly the kind of clear-cut value investment that value investors want to own. However, it acts its part as a mining stock, which can ride on the reflation in commodity prices. In addition, its ‘gold element’ has been a big driver in its share price performance. The stock’s performance in 2016 has been nothing short of a ‘skyrocket’. The stock gained almost 150% since January.

Will GRY continue to be a winner in the months ahead? That will depend on the general stability of the market. In a way, a bad market can boost gold, and a good market can boost commodities. From that perspective, GRY can be the right stock to look at.

Ken Wangdong

Emerging Market Analyst, New Frontier Investor

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