Down 31.57%, Brazilian mining company Vale SA (
VALE
,
quote
) has soared in the last week of market action, and will move even
higher now that QE3 has arrived.
[caption id="attachment_58542" align="alignright" width="300"
caption="Off road truck at Vale's Conceiçao Mine, Minas Gerais
state, Brazil"]
[/caption]
Vale could be considered, like much of the Brazilian
economy, a foreign subsidiary of China. Not only is China
Brazil's largest trading partner, its
demand for commodities
sets the standard for how well the share price of companies such as
Vale perform.
The raising of the takeover price by Glencore for Xstrata last
week lifted the industrial metals and mineral sector in recent
trading. However, investors should look at the long term value in
Vale. Now trading around $18, it's not that far from its 52-week
low of $15.77. The mean analyst target price over the next year of
market action is $25.29.
Paying shareholders to wait for it to reach that price is the
3.26% dividend yield. The average dividend for a member of the
Standard & Poor's 500 Index is around 2%. The company also has
the cash flow to raise the dividend in the future.
This healthy dividend income feature emanates from Vale's robust
profit margin of 27.91%. At 41.26%, the operating margin is very
strong too.
The price-to-earnings ratio for Vale is under 6
, which is very bullish.
Even more bullish is the price-to-earnings growth (PEG) ratio.
Investing legend Peter Lynch considers this to be one of the most
important financial indicators. A PEG of 1 is considered to be
healthy and the lower the PEG, the better. Vale has a PEG of just
0.46.
Down for the quarter, earnings-per-share growth is up 33.14%
this year. With a short float of just 1.85%, traders are not
looking for the stock to fall; a short float of 5% is considered to
be troubling for a company. With a beta of 1.56, the stock is very
volatile. This allows those with a long term perspective to buy at
lower prices which enhances the dividend yield; leading to a higher
total return when global growth strengthens.
