Amerigo Resources (TSX:ARG) Valuation Checked After Rick Rule Names It A Top Copper Stock Pick

Amerigo Resources (TSX:ARG) is back on investors’ radar after Rick Rule, a well known natural resource investor, named the copper producer as one of his preferred stock ideas for early 2025.

See our latest analysis for Amerigo Resources.

Those comments have landed at a time when Amerigo’s CA$4.97 share price has been strong, with a 30 day share price return of 29.09% and a 1 year total shareholder return of about 2.3x. This suggests momentum has been building as investors reassess its copper exposure and risk profile.

If Rick Rule’s pick has you thinking more broadly about resource and cyclical names, it could be worth scanning other opportunities like fast growing stocks with high insider ownership.

With Amerigo trading around CA$4.97, slightly above one analyst price target yet showing a large modelled intrinsic discount, the key question is straightforward: is there still mispricing here, or is the market already baking in future growth?

Price to Earnings of 29.2x: Is it justified?

At a last close of CA$4.97, Amerigo screens on a P/E of 29.2x, which lines up closely with the peer average of 30.2x but sits above the wider Canadian metals and mining industry on 23.3x.

The P/E multiple compares the current share price to earnings per share, so for a producer like Amerigo it reflects what investors are prepared to pay for each dollar of current earnings. In a cyclical sector such as metals and mining, that often folds in expectations around future copper pricing, production stability and how resilient margins might be through the cycle.

Simply Wall St’s statement that Amerigo is "good value" versus peer P/Es suggests the market is pricing its earnings broadly in line with similar Canadian names, even though its P/E sits above the wider industry average. At the same time, the SWS DCF model flags the shares as trading at about a 66.1% discount to an estimated fair value of roughly CA$14.68, which implies the current earnings multiple could be low if those cash flow assumptions were to be realised.

Compared with the broader Canadian metals and mining industry P/E of 23.3x, Amerigo’s 29.2x looks materially higher, which points to investors assigning a richer tag to its earnings than to the sector overall. That gap suggests the market is more enthusiastic about Amerigo’s specific earnings profile than the typical miner, even if the DCF work hints at a much bigger valuation gap than the P/E alone might indicate.

See what the numbers say about this price — find out in our valuation breakdown.

Result: Price-to-Earnings of 29.2x (ABOUT RIGHT)

However, there are clear risks here, including the 4.4% premium to the analyst target and the possibility that copper prices or Chilean operations may disappoint expectations.

Find out about the key risks to this Amerigo Resources narrative.

Another View: What the DCF Says

While the P/E of 29.2x suggests Amerigo is roughly in line with peers, the SWS DCF model points in a very different direction. With a fair value estimate of about CA$14.68 versus a share price of CA$4.97, the model implies the stock is heavily undervalued.

That is a wide gap for you to think about. It raises a simple question: are the cash flow assumptions too optimistic, or is the earnings based read too cautious for a cyclical copper producer?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Amerigo Resources for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 885 undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Amerigo Resources Narrative

If you see the numbers differently or would rather follow your own process, you can test the data yourself in minutes with Do it your way.

A great starting point for your Amerigo Resources research is our analysis highlighting 2 key rewards and 1 important warning sign that could impact your investment decision.

Looking for more investment ideas?

If you are serious about refining your watchlist, it makes sense to line up more candidates now rather than wait and risk missing potential opportunities.

• Spot potential value opportunities early by checking out these 885 undervalued stocks based on cash flows that might align with your return and risk preferences.
• Ride the momentum in emerging technologies by scanning these 26 AI penny stocks that link artificial intelligence themes with listed companies.
• Strengthen your income watchlist by focusing on these 12 dividend stocks with yields > 3% that offer yields above 3% alongside stock market exposure.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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