Nexa Resources S.A. (NEXA) in São Paulo, Brazil, is in the zinc mining and smelting business. The company’s board of directors recently approved a $50 million distribution, of which approximately $44 million will be treated as a cash dividend and roughly $6 million as a share premium. Its subsidiary Nexa Resources Perú also announced the early redemption and cancellation of all its outstanding 4.625% senior notes, due 2023.

The stock has gained 10.2% in price over the past three months to close Friday's trading session at $8.39. In addition, it is currently trading 34.4% below its 52-week high of $12.80, which it hit on Oct. 18, 2021. Furthermore, higher metal prices and the global economic recovery makes its near-term prospects look bright.

So here is what I think could influence NEXA’s performance in the coming months:

Favorable Analyst Estimates

For its fiscal quarter ending March 31, 2022, analysts expect NEXA’s EPS and revenue to grow 158.8% and 12.3%, respectively, year-over-year to $0.44 and $679.36 million. In addition, Wall Street analysts expect the stock to hit $10.50 in the near term, indicating a potential 25.2% upside.

High Profitability

In terms of trailing-12-month CAPEX/Sales, NEXA’s 18.50% is 231.7% higher than the 5.58% industry average. And its 27.18% trailing-12-month EBITDA margin is 27.7% higher than the 21.29% industry average. Moreover, the stock’s 17.71% and 8.25% respective trailing-12-month EBIT and ROTC are higher than the 14% and 7.53% industry averages.

Discounted Valuation

In terms of forward P/S, NEXA’s 0.42x is 71.1% lower than the 1.44x industry average. And its 0.68x forward P/B is 69.8% lower than the 2.24x industry average. Furthermore, the stock’s 4.57x and 2.79x respective forward non-GAAP P/E and P/CF are significantly lower than the 13.39x and 7.93x industry averages.

POWR Ratings Show Promise

NEXA has an overall B rating, which equates to a Buy in our POWR Ratings system. The POWR Ratings are calculated by accounting for 118 distinct factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. Among these categories, NEXA has a B grade for Value, in sync with its lower-than-industry valuation ratios.

The stock has an A grade for Momentum, which is consistent with its 25.8% gains over the past six months and 7.3% returns year-to-date.

Beyond what I have stated above, we have also given NEXA grades for Growth, Quality, Stability, and Sentiment. Get all the NEXA ratings here.

NEXA is ranked #6 out of 44 stocks in the Miners - Diversified industry.

Bottom Line

NEXA’s net revenue increased 6.8% year-over-year to $678 million in the fourth quarter, which ended Dec. 31, 2021, despite COVID-19 and inflationary cost pressures across its supply chain. It is well-positioned to benefit from the strong metal demand. So, we think it could be wise to buy the stock at its current, discounted valuation.

Note that NEXA is one of the few stocks handpicked by our Chief Growth Strategist, Jaimini Desai, currently in the POWR Stocks Under $10 portfolio. Learn more here.

How Does Nexa Resources (NEXA) Stack Up Against its Peers?

NEXA has an overall POWR Rating of B. You could also check out these other stocks within the Miners - Diversified industry with an A (Strong Buy) rating: Lundin Mining (LUNMF), South32 Limited (SOUHY), and Glencore plc (GLNCY).

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NEXA shares were trading at $8.82 per share on Monday morning, up $0.43 (+5.13%). Year-to-date, NEXA has gained 16.92%, versus a -6.18% rise in the benchmark S&P 500 index during the same period.

Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles.

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