Given the current macroeconomic backdrop, the Fed’s aggressive fight against inflation is unlikely to pause anytime soon. This could result in precious metals losing their shine. Amid this volatile backdrop, let us probe into some fundamentally weak and beaten-down stocks, Skeena Resources Limited (SKE) and Argonaut Gold Inc. (ARNGF), which one might avoid now.
Demand for precious metals and their prices soared amid financial system failures and rising fears of recession, making investors cautious about investing in risky assets. For example, gold prices scaled a one-year peak of $2,048.71 in mid-April.
However, persistent price rise remains wobbly due to rising interest rates. The Fed’s incessant fight against inflation made favorable grounds for investments in stocks, government bonds, and other instruments now, whereas attraction to a safe-haven investment diminishes.
Australia’s chief economist noted in Resources & Energy Quarterly Report that as long as geopolitical and economic uncertainty persists, real bond yields are unlikely to decline to negative levels, making investors more likely to seek alternative safe-haven assets, such as interest-bearing bonds. The world’s gold consumption is forecasted to decrease by 10% to 4,032t in 2023.
Furthermore, because of stronger-than-expected labor data, resilient consumer spending, and inflation, the Fed could persistently hike rates for longer, making the dollar strong and gold feeble.
Against this backdrop, investors could refrain from investing in fundamentally weak precious metal stocks SKE and ARNGF now.
Skeena Resources Limited (SKE)
Based in Vancouver, Canada, SKE explores for and develops mineral properties in Canada. The company explores for gold, silver, copper, and other precious metal deposits.
The stock’s trailing-12-month ROCE, ROTC, and ROTA of negative 68.17%, 52.93%, and 52.92% compare to the industry averages of 11.31%, 6.52%, and 5.22%, respectively.
For the fiscal year that ended December 31, 2022, SKE’s net cash used in operating activities came in at CAD93.38 million ($68.89 million). For the same period, its loss and comprehensive loss and loss per share came stood at CAD88.89 million ($65.58 million) and CAD1.26, respectively.
Moreover, its total current assets stood at CAD50.12 million ($36.98 million) for the fiscal year that ended December 31, 2022, compared to CAD54.20 million ($39.98 million) in the year-ago period.
Analysts expect SKE’s revenue to come in at $296.17 thousand for the fiscal year ending December 2024, down 55.7% year-over-year.
SKE’s shares have declined 17.81% over the past year to close its last trading session at $7.20.
SKE’s bleak prospects are reflected in its POWR Ratings. The stock has an overall D rating, equating to Sell in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
SKE has a D grade for Momentum and an F for Quality and Value. It is ranked #35 within the 56-stock Miners - Gold industry.
In addition to the POWR Ratings grades we’ve stated above, one can see SKE ratings for Growth, Stability, and Sentiment here.
Argonaut Gold Inc. (ARNGF)
ARNGF engages in gold mining, mine development, and mineral exploration activities at gold-bearing mineral properties in North America.
The stock’s trailing-12-month ROCE, ROTC, and ROTA of negative 18.25%, 5.47%, and 12.09% compare to the industry averages of 11.31%, 6.52%, and 5.22%, respectively.
For the fiscal fourth quarter that ended December 31, 2022, ARNGF’s revenue declined 6.8% year-over-year to $95.90 million. Its gross loss for the same quarter stood at $24.60 million compared to the gross profit of $17.80 million for the prior-year quarter that ended December 31, 2021.
For the same quarter, its adjusted net loss and adjusted net loss per share stood at $37.70 million and $0.05, compared to the adjusted net profit and adjusted earnings per share of $10.20 million and $0.03, respectively, for the year-ago quarter.
Analysts expect ARNGF’s revenue to come in at $396.20 million for the fiscal year ending December 2023.
ARNGF’s shares have declined 69.7% over the past year and 2% over the past three months to close its last trading session at $0.50.
ARNGF’s POWR Ratings reflect its poor prospects. The stock has an overall D rating, equating to Sell in our proprietary rating system.
ARNGF has an F grade for Quality and a D for Momentum. It is ranked #34 within the same industry.
Click here to see additional grades for ARNGF for Growth, Value, Stability, and Sentiment.
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SKE shares were trading at $7.24 per share on Wednesday morning, up $0.04 (+0.56%). Year-to-date, SKE has gained 36.09%, versus a 7.93% rise in the benchmark S&P 500 index during the same period.
About the Author: Sristi Suman Jayaswal
The stock market dynamics sparked Sristi's interest during her school days, which led her to become a financial journalist. Investing in undervalued stocks with solid long-term growth prospects is her preferred strategy. Having earned a master's degree in Accounting and Finance, Sristi hopes to deepen her investment research experience and better guide investors.
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