Is Now the Time to Buy Kazakhmys plc (KAZ)?

LONDON — I’m always searching for shares that can help ordinary investors like you make money from the stock market.

So right now I am trawling through the FTSE 100 and giving my verdict on every member of the blue-chip index. Simply put, I’m hoping to pinpoint the very best buying opportunities in today’s uncertain market.

Today I am looking at Kazakhmys plc (LON:KAZ) to determine whether you should consider buying the shares at 570 pence.

Kazakhmys plcI am assessing each company on several ratios:

Price/earnings (P/E): Does the share look good value when compared against its competitors?
Price/earnings-to-growth (PEG): Does the share look good value factoring in predicted growth?
Yield: Does the share provide a solid income for investors?
Dividend cover: Is the dividend sustainable?

Let’s look at the numbers

Stock Price 3-Year EPS Growth Projected P/E PEG Yield 3-Year Dividend Growth Dividend Cover
Kazakhmys 570 pence 170% 7.3 0.1 2.6% (26%) 10

The consensus analyst estimate for next year’s earnings per share is $1.18 (up 70%), and dividend per share is $0.15 (down 12%).

First, I should mention that in a trading update released last month, Kazakhmys plc (LON:KAZ) reported that profits for 2012 were $368 million, which I believe gives the company an earnings-per-share figure of approximately $0.70. However, Kazakhmys’ full-year audited results will not be released until the end of March.

Furthermore, Kazakhmys plc (LON:KAZ) is facing a potential multibillion-dollar writedown, which could significantly affect the final 2012 results.

Anyway, Kazakhmys plc (LON:KAZ) is currently trading on a projected P/E of 7.3, slightly cheaper than its peers in the mining sector, which are currently trading on an average P/E of around 10.4.

Kazakhmys’ P/E and predicted growth rate give a PEG ratio of around 0.1. However, because of the uncertainty surrounding Kazakhmys’ future near-term earnings, I believe this figure cannot help with my analysis.

Offering a 2.6% yield, the company’s shares offer an income about level with that of the mining sector’s average. However, over the past three years, Kazakhmys plc (LON:KAZ)’ dividend has fallen a compounded 26%, implying that the yield could soon lag that of its peers.

That said, the dividend is about 10 times covered by earnings, giving Kazakhmys plc (LON:KAZ) plenty of room for further payout growth.