Why I think this ASX small-cap stock is a bargain at 29 cents

I think this stock has a lot of return potential.

| More on:

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The ASX small-cap stock Aeris Resources Ltd (ASX: AIS) could still be a bargain, in my view, despite rising by 26% in September to date.

The ASX mining share has been through a difficult period and now it looks like a good long-term opportunity to me at the current valuation.

Aeris describes itself as a mid-tier base and precious metals producer. Its mining portfolio is focused on copper, with two operating assets, a mine on care and maintenance, a long-life development project and a highly prospective exploration portfolio.

The company says it has a strong pipeline of organic growth projects and an "aggressive" exploration program. The ASX small-cap stock also continues to investigate strategic merger and acquisition opportunities.

Let's take a look at what is attractive about the business.

Young successful engineer, with blueprints, notepad, and digital tablet, observing the project implementation on construction site and in mine.

Image source: Getty Images

Strong FY25

The company said its costs were well managed across the company, enabling it to benefit from strong commodity prices, across copper and gold (which it also produces).

Aeris Resources reported revenue growth of 7%, operating profit (EBITDA) growth of 78%, operating cash flow growth of 109% and earnings per share (EPS) growth of 262% to 4.7 cents.

Its balance sheet also improved, with the cash balance improving 14% to $28.2 million and net assets growing by 17% to $317.8 million.

Good outlook

The company is reinvesting its operating cash flows into capital and exploration, including the Murrawombie open pit construction, the Constellation drill program and the Budgerygar paste fill plant at Tritton. It's these sorts of initiatives that can help the business become larger and more profitable.

The ASX small-cap stock can't control what happens with resource prices, but its operations look set for another good year in FY26. It's focused on lifting production at the Tritton project, extending the mine lives at both Tritton and Cracow, adding value to its projects and divesting non-core assets.

While there could be volatility with copper prices, I'm optimistic on the long-term because of the ongoing global electrification efforts as well as there being limited high-quality copper projects coming online in the foreseeable future. Gold prices remain strong and could strengthen even further if global uncertainty increases.  

Low valuation

Despite the rapid rise of the Aeris Resources share price, I think it's still valued very attractively.

At the current valuation, the ASX small-cap stock is priced at a price/earnings (P/E) ratio of 6. If the business can grow its profit over time, then this will seem like a very cheap valuation, in my opinion.

Motley Fool contributor Tristan Harrison 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 Scott Phillips.

More on Resources Shares

Green stock market graph with a rising arrow symbolising a rising share price.
Share Gainers

Guess which ASX mining stock is rocketing 80% today on huge Philippines news

This small-cap ASX mining stock is coming close to doubling its value today.

Read more »

A group of three men in hard hats and high visibility vests stand together at a mine site while one points and the others look on with piles of dirt and mining equipment in the background.
Resources Shares

Why this ASX 200 iron ore stock is holding up in today's sell-off

Champion shares slip despite completing a major European acquisition.

Read more »

A silhouette shot of two business man shake hands in a boardroom setting with light coming from full length glass windows beyond them.
Resources Shares

Champion Iron finalises acquisition of Norway's Rana Gruber

Champion Iron completes its US$300m acquisition of Norway’s Rana Gruber, expanding its high-purity iron ore portfolio.

Read more »

Two workers working with a large copper coil in a factory.
Resources Shares

Missed BHP shares' massive run? Here's what could happen next

Up 52%, but do brokers think there’s more in the tank?

Read more »

Robot humanoid using artificial intelligence on a laptop.
Resources Shares

Buying BHP shares? Here's how AI is boosting the mining giant's revenue

BHP is embracing AI technologies to streamline its operations. But how?

Read more »

A woman is very excited about something she's just seen on her computer, clenching her fists and smiling broadly.
Resources Shares

Fortescue shares ease, but this major update could keep momentum building

Fortescue slips despite its Pilbara renewable rollout moving ahead.

Read more »

A mining worker clenches his fists celebrating success at sunset in the mine.
Resources Shares

Monadelphous wins $145m of new and renewed resources sector contracts

Monadelphous reported $145 million in new and extended contracts across key resource clients Rio Tinto, BHP, and Queensland Alumina.

Read more »

Two cheerful miners shake hands while wearing hi-vis and hard hats celebrating the commencement of a HAstings Technology Metals mine and the impact on its share price
Resources Shares

Fortescue accelerates world's first large-scale industrial green energy grid

Fortescue is speeding up its renewable-powered green grid rollout, targeting major cost savings and earlier fossil fuel elimination.

Read more »