Vale (VALE) Poised to Grow Despite Headwinds: Time to Buy?

We issued an updated research report on Vale S.A. VALE on Mar 15, 2016. Established in 1942, the company is currently the largest exporter and importer of iron ore and pellets in the global mining market. Over time, the premium industrial metals and minerals company has significantly enhanced the scale of its business through tactical strategies. However, of late, Vale is facing certain macro headwinds.

Scopes for Improvement

Increasing global industrialization and economic recovery in certain developed countries are driving the demand for iron, copper and aluminium. This should support Vale’s top-line growth in the long run. Moreover, the company is trying to boost margins through better operational performance, cost saving initiatives, productivity enhancement strategies and organic growth projects. Moreover, with efficient disinvestment programs and tactful capital deployment strategies, the company aims to stabilize its absolute debt level, going ahead.

Problems to Consider

The current macroeconomic situation poses several challenges for the mining industry. Sluggish economic growth in several emerging markets, weakening demand from China, a major industrial goods consuming nation, uncertainties in financial markets, and volatility in the energy space are hurting Vale’s performance.

Moreover, dismal commodity pricing continues to affect the Zacks Rank #3 (Hold) stock’s revenues. Decline in the prices of iron ore, bauxite and copper, some of the company’s major products, is a concern. Further, competitive threats expose Vale to risks of market share loss and compel it to lower the prices further, in turn, affecting revenues.

Stocks to Consider

Some better-ranked stocks within the industry are Avino Silver & Gold Mines Ltd. ASM, Golden Star Resources, Ltd. GSS and Ferroglobe PLC GSM. All the three stocks currently have a Zacks Rank #2 (Buy).

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FERROGLOBE PLC (GSM): Free Stock Analysis Report
 
GOLDEN STAR RES (GSS): Free Stock Analysis Report
 
VALE SA (VALE): Free Stock Analysis Report
 
AVINO SILVER&GD (ASM): Free Stock Analysis Report
 
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Zacks Investment Research
VALE Research -- Mutual Funds Top 10 Holdings include "VALE"
ASM Research -- Mutual Funds Top 10 Holdings include "ASM"
GSS Research -- Mutual Funds Top 10 Holdings include "GSS"
GSM Research -- Mutual Funds Top 10 Holdings include "GSM"