Date of Data Capture: 8/8/2017
Name: GALAXY RESOURCES LIMITED (GXY)
Classification: Specialty Mining & Metals
Current Price: $1.975
Market Capitalisation: $782 M
Forecast Sales Growth: 65.69%
Gross Yield: 0%
Consensus Price Target: $2.82
# Covering Analysts: 8
Discount at Current Price: 42.78%
Price Target Trend: Increasing-Decreasing
Signal Timeframe: Quarterly-Weekly-Daily
Trend Bias: Up-Down / Long-Medium
Focus: Capital Growth
Set up Notes:
• A volatile stock and a play on the emergent electrical storage market, GXY carries strong analyst forecasts and sentiment as they look to move into first profits this year with earnings growth seen extending through to 2019.
• Fundamentals are thin due to their stage of development, but with sales, earnings and profit forecasts showing aggressive consensus targeting into next year this could provide a nice short to medium-term entry opportunity.
• Backed by good technicals, we are following the well-correlated medium-term signal here which correctly identified both previous major rallies and is now showing a good potential reversal of their recent 56% dip, with good historical targets
Growth Focus: Galaxy Resources Ltd (GXY)
Our primary focus here is capital gain, we will select our stocks from the ASX top 500 All Ordinaries Index.
We put our prospective target companies through a battery of fundamental and technical tests in order to connect with prospects having the greatest positive potential. Here we find our interest switching to globally diversified lithium producer Galaxy Resources Ltd (GXY), a stock that truly looks ready to charge ahead.
While the element Lithium is used in pottery, medicine and industrial lubricants, the main driver of growth is seen in its key attributes of high energy density and low weight; combining to make batteries with high charge and power-to-weight ratios. In the burgeoning age of electric vehicles and residential energy storage this will be an important component of the future, and you will not want to remain static on this.
GXY first went live back in 1996, listed in 2007 and remains headquartered in Perth, Western Australia to this day. Somewhat fittingly the history of Galaxy is equal parts positive and negative, but if forward projections are correct, Galaxy has a very bright future ahead of it. And most likely a long one; with large reserves and good geographical diversity achieved through its Canadian and Argentinian operations and also offering strong paths to further growth beyond its primary Australian production moving into profit this year. With a history of extreme volatility this move towards income and stability is important and offers more than just a spark of hope as they look to move beyond past shocks.
Backing this view we have attractive historical performance and encouraging fundamental forecasts with strong growth in sales and earnings seen carrying through to 2019. Analyst sentiment is largely positive and while we have seen consensus valuation targets falling back and following the price lower through the last 8 month consolidation, they still remain some 40% higher than current pricing.
The price history of Galaxy is also one of polar opposites, with extreme highs and lows playing out over the last 10 years - rallying from 50c in 2007 to reach $4 by 2009 and then nearly collapsing by 2015 where they had flattened out around 10c. From those lows began a dynamic recovery where pricing reached highs of $2.90 within a year before pulling back into a 5 month consolidation during 2016. The stock went on to rally and double again by early 2017 before falling back to old support and where we find them right now, working against $2 resistance.
There have been two major rallies and consolidations in the recovery so far, moving in-line with the well-correlated medium-term model that is signalling for a reversal and potential third rally emerging here. Overall, we believe the positives outweigh the negatives, with excellent fundamental forecasts being applied to both the lithium sector and to Galaxy itself. If you like the potential of lithium based on the uptake of electric vehicles and storage then we think you should consider plugging into GXY, they could be a real powerhouse investment.