Sibanye Stillwater Stock (NYSE:SBSW): An Undervalued, “Dual-Use” Investment

While the precious metals sector presents significant risks, contrarians seeking an undervalued, “dual-use” investment should consider Sibanye Stillwater (NYSE:SBSW). Headquartered in South Africa, Sibanye is a major gold producer. Thus, it’s a theoretical beneficiary of the fear trade. It’s also a major palladium producer. So far, investors remain troubled about company-specific risks. However, I am bullish on SBSW stock because it offers long-term relevance.

Primarily, Sibanye should appeal to investors because of the gold market’s resurgence since bottoming last year. True, the Federal Reserve’s commitment to tackling inflation through higher rates on paper bodes poorly for gold and SBSW stock. However, it’s not a clear-cut headwind.

First, even with higher rates, broader circumstances such as mass layoffs and geopolitical flashpoints have investors on edge. Therefore, gold – and by logical deduction, SBSW stock – may rise on the fear trade; that is, investors protecting their wealth through the intrinsic value of precious metals.

Second, inflation can still become the dominating force. Mainly, China’s economic reopening implies greater commercial activity. In turn, this framework will likely lead to greater resource consumption. With Russia removing its energy resources to western nations, more dollars globally may chase after fewer goods. Cynically, that’s a positive for SBSW stock.

Unfortunately, distracting issues such as labor strikes in Sibanye’s South African gold mines and floods impacting its U.S. operations hurt sentiment. Nevertheless, these are likely temporary setbacks. For forward-thinking investors, SBSW stock may represent a solid opportunity.

Palladium Offers Another Angle for SBSW Stock

Aside from the gold business, Sibanye also represents one of the world’s largest primary producers of palladium. An incredibly rare silver-like metal, palladium prices have been volatile in both directions. In part, that’s because Russia offers a second cynical upside catalyst. Up until 2021, Russia represented the biggest producer of the metal.

Mainly, auto manufacturers integrate palladium into their combustion cars as a key component of catalytic converters. Now, the political and ideological winds suggest that electric vehicles (EVs) will eventually become the dominating force in transportation. However, that time may be a long time coming.

One of the harsh realities is that EVs are expensive compared to their combustion-powered counterparts. Early in 2022, the average price of a new EV stood at $62,876. However, this metric was only a few thousand dollars shy of the pre-pandemic U.S. median household income. Put another way, EVs symbolize amazing technologies and conveniences. Unfortunately, they’re just not accessible, affording longer relevancies for combustion cars.

Of course, that means a greater need for palladium-integrated catalytic converters, thus bolstering SBSW stock. Moreover, palladium also offers applications in new-generation energy platforms.

Specifically, palladium is a key component of fuel cell catalysis. According to research published on ScienceDirect, palladium features a strong affinity to hydrogen. Specifically, palladium carries both catalytic and hydrogen-absorbing properties. Enticingly, as green hydrogen becomes a burgeoning market, SBSW stock may see long-term gains.

Sibanye Stillwater is Wildly Underrated

Even better, the bullish case for SBSW stock doesn’t just center on large-scale narratives. Instead, the financials indicate that Sibanye Stillwater pings as wildly underrated.

First, the market prices SBSW stock at a trailing earnings multiple of 5.1. In contrast, the underlying sector’s median multiple stands at 12.3. Based on earnings, SBSW’s valuation ranks lower (better) than 77.8% of its peers. In addition, SBSW trades at a forward (estimated) earnings multiple of 3.4, ranking better than 91.5% of the competition.

Further, the mining firm benefits from strong operational statistics. For instance, its three-year revenue growth rate stands at 20%, outpacing 79.5% of its rivals, and its net margin is 13.3%, above 75.2% of other miners.

Is SBSW Stock a Buy, According to Analysts?

Turning to Wall Street, SBSW stock has a Moderate Buy consensus rating based on two Buys, two Holds, and zero Sell ratings. The average SBSW stock price target is $13.03, implying 62.27% upside potential.

The Takeaway: SBSW Stock Features Utility and Value

While the mining arena can be wildly volatile, SBSW stock arguably offers too good of a deal to pass up. First, its core gold business should attract attention from concerned investors. Second, Sibanye’s palladium unit enjoys critical industrial relevancies. Finally, investors at large don’t yet appreciate the company’s pertinence. That might change, meaning investors should research Sibanye now.


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Joshua Enomoto
Best known for integrating analytical rigor with compelling wit, Joshua Enomoto helps dissect complex narratives for the broad retail investor audience, providing value across the entire knowledge spectrum. His original content has been published across several investment and business-related platforms, including TipRanks, InvestorPlace, Barchart, Benzinga and Fintel among many others. He is also a frequent guest expert for CGTN America, covering a range of economic, societal and consumer market topics. Josh is a graduate of U.C. San Diego and composes music in his free time.