Insights

4 reasons the South32 (ASX:S32) share price could be a strong buy

South32 shares could be in the buy zone right now…
The post 4 reasons the South32 (ASX:S32) share price could be a strong buy appeared first on The Motley Fool Australia. –

The South32 Ltd (ASX: S32) share price is pushing higher on Friday afternoon.

At the time of writing, the mining giant’s shares are up 1% to $3.53.

This means the South32 share price is now up 41% in 2021.

Is it too late to invest?

The good news for investors is that one leading broker doesn’t believe it is too late to invest and still sees plenty of upside left in the South32 share price.

According to a note out of Goldman Sachs this morning, the broker has retained its conviction buy rating and $4.40 price target.

Based on the current South32 share price, this implies potential upside of almost 25% for investors. And that’s before dividends! More on that in a minute.

Why is Goldman bullish on the South32 share price?

Goldman has named four key reasons why it is bullish on the South32 share price.

The first reason is its valuation. It highlights that the company’s shares are trading at ~0.9x NAV excluding the proposed acquisition of Sierra Gorda. This is notably lower than some of its peers.

The second reason is its strong free cash flow outlook. Driven mostly by its exposure to base metals such as aluminium and alumina, Goldman is forecasting a free cash flow yield of 16% to 18% over the next two years.

This strong free cash flow leads onto the third reason Goldman is bullish. The broker believes South32 will be in a position to extend its US$250 million share buyback and pay big dividends to shareholders. In respect to the latter, the broker is forecasting dividend yields of 12% to 13% in FY 2022 and FY 2023.

Finally, a fourth reason to be positive is South32’s positive project newsflow.

Goldman commented: “We would see the commitment to the restart of the Alumar aluminium smelter as a positive (c. 6% upside to EBITDA), and highlight the potential for capex on the US$800mn Dendrobium next domain (DND) met coal project to be reduced (which we would view as a positive). S32 is currently selling a base metal royalty portfolio (no value in our model), and is due to release the PFS results from the Hermosa zinc/silver/lead project (GS NPV US$1.1bn) in Arizona in Nov/Dec.”

All in all, the broker believes South32 share price is one of the best buys in the resources sector right now.

The post 4 reasons the South32 (ASX:S32) share price could be a strong buy appeared first on The Motley Fool Australia.

Should you invest $1,000 in South32 right now?

Before you consider South32, you’ll want to hear this.

Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now… and South32 wasn’t one of them.

The online investing service he’s run for nearly a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.

*Returns as of August 16th 2021

More reading

These 3 ASX 200 shares are topping the volume charts this Friday

These 3 ASX 200 shares topped the volume charts on Thursday

2 ASX 200 mining shares named as buys

These 3 ASX 200 shares are topping the volume charts this Wednesday

These 3 ASX 200 shares are topping the volume charts on Monday

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

Trade The World Anywhere & Anytime!

Mobile app platform with over 50,000 global listed securities across 12 markets (over 70% global market capitalisation), right from your Android or iOS device.

Integrated with exclusive trading idea and investment analysis tools to help you find actionable insight on virtually every financial instrument across our 12 global markets, to help you optimise your trading strategies.

Refer Your Friends

Tell your friends about Monex and gift them FREE access to our trading tools.

We respect your privacy and will only send this one email notification to your friends. 

Share With Your Friends

Share on facebook
Share on twitter
Share on linkedin

Monex Trading Tools Access and Usage Terms

The Monex Trading Tools (referred to as ‘tools’ hereafter) are available to you inside your client portal;


To activate access to the tools, you must have a verified and approved trading account and have made a deposit of at least AUD $1000.


An active and funded account with a positive trading balance is required to continue to have access to the tools;


Although the tools are available to you indefinitely, Monex Securities may at it’s discretion disable access to the tools in the future;


Monex securities reserves the right to change these terms and conditions from time to time, as it sees fit, without notice.

Important Notice
iOS & Android App - 12 International Markets & Over 70% Global Market Cap. $0 Brokerage On US Trades. Click Here!