Is now the wrong time to buy Sirius Minerals PLC after share price gains?

Does Sirius Minerals PLC (LON:SXX) (SXX.L) lack investment appeal after its strong showing in 2018?

Sirius Minerals
Sirius Minerals

So far this year the Sirius Minerals PLC (LON:SXX) (SXX.L) share price has risen from 23p to 33p. Given that it increased by 4p in 2017, it has been a successful 17-month period for the stock from an investment perspective.

Those figures, though, do not show the volatility which the company’s shares have experienced in the same time period. Looking ahead, I feel that further volatility is likely, although I’m also of the view that further capital growth could be on the horizon.

One reason for this is that Sirius Minerals still appears to be undervalued in my opinion. Its share price of 33p is still a long way off its project NPV, which at $15.4 billion works out as around 232p per share at the moment.

The company appears to have a solid strategy which is performing as expected. Therefore, there could be further upside potential ahead.

It is anticipating progress on financing in the current year, and with it seeking to develop its marketing function as well as the construction of its production facility, there seem to be clear catalysts to help push its share price higher.

In addition, Sirius Minerals is on track to commence first production in 2021. I feel that as that date moves closer, investors may gradually become more positive about the company’s prospects.

At the moment, it can be difficult to become excited about a company with no revenue and which is not due to start production in the near term.

But as first production nears, investors may begin to price in potential revenue and profit figures. This could have a significant impact on the company’s valuation and may lead to a higher valuation.

As a result, I’m optimistic about the company’s future prospects. It seems to have a bright long-term future, although share price falls cannot be ruled out given its track record of volatility.

About Robert Stephens 3395 Articles
Robert Stephens is a CFA Charterholder and an Equity Analyst by trade. He is a passionate private investor who has been buying and selling shares for many years, owning a wide range of UK shares in the process. He has written for Citywire and The Motley Fool US and now runs his own business. To contact Robert, please email or use one of the other contact methods available on the 'Contact Us' page