The IGO Ltd (ASX: IGO) share price has slipped 6% in Tuesday's session and is $12.755 at the time of writing.
After climbing amid a global resources boom in 2022, the IGO share price has fallen from a high of $14.17 just five days ago.
Joining IGO is the S&P/ASX 300 Metals & Mining Index (ASX: XMM). It's also slipped 5.35% in today's session and 11% this past week. IGO is down 9% over the same period
Is the IGO share price cheap?
The rally in commodities, plus IGO's recent bid to secure Western Areas Ltd (ASX: WSA), has seen some volatility in the IGO share price in recent weeks.
After the miner sweetened its takeover offer to $3.87 a share, up from an earlier $3.36, analysts at RBC Capital Markets noted they saw "strategic rationale" in the decision.
In a recent note, RBC Capital analyst Kaan Peker noted "there is strategic rationale with consolidating Western Australia nickel sulphide producers".
Peker reckons the offer – that values Western Areas at nine times next year's earnings before interest, tax and amortisation (EBITDA) projections – could be accretive for IGO's own pre-tax earnings as early as FY22.
Meanwhile, analysts at JP Morgan recently retained their overweight rating on IGO and value the company at $17.40 per share.
"IGO [is] a one-stop stock for EV raw materials," the broker mentioned in a recent note. "Our overweight rating reflects the upside relative to our DCF valuation, high earnings growth and growing FCF yield."
Earlier, the broker had mentioned IGO was well-positioned to take on the Western Areas acquisition, finishing 1H FY22 with $570 million in cash on its balance sheet.
JP Morgan also took note of IGO's latest earnings that showed capital expenditures (capex) guidance for FY22 is high at $250-$300 million. That's more than three times what the broker was budgeting.
"Management called out a number of projects to enable further expansions, but the spend is not on the CGP3/4/5 expansions themselves," the broker wrote on IGO's capex guidance.
"[The Greenbushes mine] costs of $388/tonne included royalties of $146/tonne, which when backed out showed costs were steady [quarter-on-quarter]."
The consensus of analyst estimates values IGO at $13.25 a share, according to Bloomberg data. Judging from that valuation, and depending on one's own valuation, IGO could be cheap with the pullback.
From the list of broker coverage, 53% rate it a buy whereas 30% say it's a hold right now. Together, that's 83% saying to either buy or hold onto IGO shares at present.
IGO share price snapshot
In the last 12 months, the IGO share price has climbed 77% and is up 11% for the year, even with this most recent pullback.
The company has a market capitalisation of $9.6 billion at the current share price.
