The Saracen Mineral Holdings Ltd (ASX: SAR) share price was one of the worst performers in the S&P/ASX200 Index (ASX: XJO) today as it trades 2.5% lower – but could this ASX miner be a bargain buy at its current price?
Strong operational expansion boosts Saracen share price
While the Saracen share price may be lower today, the fact remains that it is still a whopping 680% higher than it was 5 years ago.
That’s a more than handy return for an ASX mining company, and it’s not the only miner whose share price is soaring.
The Northern Star Resources Ltd (ASX: NST) share price is up 760% over the last half decade to outperform the likes of Fortescue Metals Group Ltd (ASX: FMG) which has still managed to double over the same period.
Saracen’s outperformance has been led by the company’s ability to change from loss-making to profit-making during this time, with the company most recently posting a net profit after tax (NPAT) of $32.73 million as at 31 December 2018.
Shaky macro conditions push gold prices higher
While this has buoyed investors’ confidence in the stock and its ability to generate returns, Saracen has also been helped by rising global gold prices in the face of geopolitical tensions and a stuttering global economy.
Gold prices have climbed 11% so far this year and could be set to touch a 6-year high with ongoing US-China trade war concerns and a shaky outlook for global growth in the short to medium-term.
5 years ago, gold was selling for 7% less than it is today which has been part of the steady increase for ASX gold miners over this same time period.
Is Saracen the best ASX miner on the market?
In my opinion, while Saracen has surged 680% over the past 12 months, there could be better options to invest in 2019.
I think gold can still provide a good diversification option within a portfolio but the growth may be slowing down for the Saracen share price in 2019.
I’d instead be looking at the likes of Fortescue as a leader in the sector and trying to capture upside from a global growth slowdown to boost returns higher and protect portfolio returns.
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Motley Fool contributor Kenneth Hall has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.