The average target price of AAL.L is 2425 and suggests 8% upside potential. Usually, this means a HOLD recommendation among investment firms. This neutral recommendation suggests no significant price movement, up or down, in the next 12 months. The most optimistic analyst has a target price of 2781.3. This translates into 24% upside potential in the best case. On the other hand, the most pessimistic analyst has a target price of 1931.4. This is equivalent to 14% downside potential in the worst case. 

Anglo American plc operates as a mining company worldwide. The company explores for rough and polished diamonds, copper, platinum group metals, metallurgical and thermal coal, and iron ore; and nickel, polyhalite, and manganese ores, as well as alloys. Anglo American plc was founded in 1917 and is headquartered in London, the United Kingdom.

Anglo American plc

Basic Materials

The company has a track record of regular dividend payments. It has paid dividends in each of the past ten years. Dividend per share (DPS) has grown yearly, but the dynamics are unclear. In the past 12 months, the dividend yield has barely been above zero and was substantially below that of its peers. At the same time, the average five-year yield has been significantly higher and exceeded most of its peers. On average, the company pays dividends twice a year. 

AAL.L reported revenue of USD 27 290mn in the last 12 months, down 11% from FY23. At the same time, the dynamics of cash flow, as measured by free cash flow (FCF), were drastically different. Market expects EPS to reach USD 1.63 in FY25.

Over the last six months, the stock performance has varied, with an increase following a drop. The stock's price trend wasn't definitive when matched against its global counterparts from the same sector and industry (as depicted above). Within the past six months, its performance has trailed this peer group's by 6ppts and its growth accelerated by 3ppts in the past month. This is equally valid for peers from the same country and industry. Given the stock's valuation versus its peers, its total price movement is neither favourable nor unfavourable.

The company has reported good EBITDA margins compared to its global peers in recent years. EBITDA margin amounted to 31.9% in the last 12 months, up from 12.2% in FY23. 

Historically, AAL.L has reported very poor net margins compared to its global peers. Specifically, in the last 12 months, this metric equalled -5.6%, a growth from -11.2% in FY23. 

Anglo American plc reported a return on equity (RoE) of -7.2% in the last 12 months, up from -11.7% in FY23. The market consensus projects an RoE of -9.0% in FY24, again behind its peers. 

Another important profitability metric, return on assets (RoA), amounted to -2.5% in the last 12 months, an increase from -4.6% in FY23. The market analysts predict that RoA will be -3.4% in FY24, again weaker than its peers. 

In the last 12 months, the return on capital employed (RoCE) grew to -2.9%, below the peers. The consensus estimate for FY24 for RoCE is 0.3%, again behind the peers. 

The ratio of return on invested capital (RoIC) to the weighted average cost of capital (WACC) has been 0.5 in the past several years. This ratio implies a weak shareholder value creation. 

The institutional, legal, and compliance risks associated with the company's country are minimal. In combination with stringent business standards, shareholder rights are very highly protected.

AAL.L boasts high trading liquidity. The average private investor can sell his common position in the stock immediately. Liquidity is usually quite stable and remains extremely favourable on the days with the lowest activity. The trading volume mostly stays the same even under highly turbulent market conditions. The stock has a small market capitalisation, which usually makes its trading liquidity erratic and unpredictable. 

No other major risks have been identified.

The risk of default is moderate. We note robust profitability, solid cash flow generation, and an favourable capital structure, among the positive credit factors. Among the negative credit factors and we point to slow historical revenue growth, negligible return on capital.

In highly turbulent market conditions, AAL.L is moderately volatile. In other words, the stock will fall more than the index in times of extreme market volatility or shocking company news. Standalone, the worst-day losses (less than 1% of the time) will likely be moderate. 

In normal market circumstances, AAL.L is moderately volatile. Put differently, without outstanding market volatility or shocking company news, the stock's price will move slightly wider than the index. The stock's losses on its worst days (less than 1-5% of the time) will range from limited to mild. 

From both historical and forecast perspectives, the stock is underpriced compared to similar stocks. Specifically, the stock is 'cheap' on P/E, undervalued on EV/EBITDA, reasonably priced on P/FCF. 

Anglo American plc

£ 2235.5

5

Anglo American plc

£ 2235.5

5

Risk factor

Profitability factor

Risk / Profitability

Risk factor

Profitability factor

£ 2235.5

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