Emeco Holdings Ltd [ASX:EHL] is up 9.3% today, trading at a share price of $.375 on the back of a high volume of trades.
Emeco is up 62% for the year, which is strong performance by any measure.
Take a look at its one-year chart below:
Understanding what Emeco does is the key
First we need to understand what Emeco does.
Emeco rents out equipment to the mining industry, in particular heavy earth moving equipment.
Previously we covered the resilience of mining stocks amid rising tension in the market.
Well part of this is down to commodity prices, which includes iron, copper etc.
Have a look at commodity prices over the past year and you will start to get a sense for what’s driving Emeco forward.
As commodity prices rise, mining stocks stand to benefit.
They increase exploration and mining activity to take advantage of rising prices.
To do this they need to rent out the heavy earth moving equipment that Emeco specialises in.
Emeco’s credit rating improves, revenue up significantly
As noted by the company, an improved balance sheet has seen its credit rating improve recently.
Meanwhile, its group operating revenue is up 63.5% over last financial year.
These were peak mining years, and as geopolitical tensions rise, commodity prices could be set to edge higher.
To get a sense for what is meant by this connection have a look at this handy chart which overlays commodity prices with major geopolitical events.
Any further tension would only be good news for Emeco, as it in a sense ‘piggy backs’ on any growth in the mining sector.
For Money Morning
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