Has Taseko Mines Become the Perfect Stock?

Every investor would love to stumble upon the perfect stock. But will you ever really find a stock that provides everything you could possibly want?

One thing's for sure: You'll never discover truly great investments unless you actively look for them. Let's discuss the ideal qualities of a perfect stock, then decide if Taseko Mines (NYSE: TGB  ) fits the bill.

The quest for perfection
Stocks that look great based on one factor may prove horrible elsewhere, making due diligence a crucial part of your investing research. The best stocks excel in many different areas, including these important factors:

  • Growth. Expanding businesses show healthy revenue growth. While past growth is no guarantee that revenue will keep rising, it's certainly a better sign than a stagnant top line.
  • Margins. Higher sales mean nothing if a company can't produce profits from them. Strong margins ensure that company can turn revenue into profit.
  • Balance sheet. At debt-laden companies, banks and bondholders compete with shareholders for management's attention. Companies with strong balance sheets don't have to worry about the distraction of debt.
  • Money-making opportunities. Return on equity helps measure how well a company is finding opportunities to turn its resources into profitable business endeavors.
  • Valuation. You can't afford to pay too much for even the best companies. By using normalized figures, you can see how a stock's simple earnings multiple fits into a longer-term context.
  • Dividends. For tangible proof of profits, a check to shareholders every three months can't be beat. Companies with solid dividends and strong commitments to increasing payouts treat shareholders well.

With those factors in mind, let's take a closer look at Taseko Mines.

Factor

What We Want to See

Actual

Pass or Fail?

Growth 5-Year Annual Revenue Growth > 15% 4.9% Fail
  1-Year Revenue Growth > 12% 8.2% Fail
Margins Gross Margin > 35% 28.3% Fail
  Net Margin > 15% 6.3% Fail
Balance Sheet Debt to Equity < 50% 50.3% Fail
  Current Ratio > 1.3 4.91 Pass
Opportunities Return on Equity > 15% 3.6% Fail
Valuation Normalized P/E < 20 27.32 Fail
Dividends Current Yield > 2% 0% Fail
  5-Year Dividend Growth > 10% 0% Fail
       
  Total Score   1 out of 10

Source: S&P Capital IQ. Total score = number of passes.

Since we looked at Taseko Mines last year, the company has seen its score plunge by three points. That makes a drop of seven full points in just two years, and its shares have essentially gone nowhere in the past year in a challenging market for mining companies.

Taseko's mix of gold, copper, and molybdenum has served it well during the big global industrial boom of the past decade. Between rising prices for gold, resulting in part from concerns about long-term monetary devaluation, and strength in copper and other base metals from construction and infrastructure demand, Taseko has taken full advantage since the early 2000s.

But lately, Taseko has had to deal with some setbacks. A slowdown in growth, especially in China, sent the entire base-metals industry falling, with fellow copper producers Freeport-McMoRan (NYSE: FCX  ) and Southern Copper (NYSE: SCCO  ) dropping to their lows of the year as a result. Taseko in particular has had to shut down one of its mills, deal with bad weather, and also cited what Fool contributor Rich Duprey terms as "difficult ore characteristics" as justification for some of its woes.

Looking forward, Taseko will continue to find itself linked to the world's economic prospects. For instance, when the Chinese government announced earlier this month a $150 billion plan to boost infrastructure spending, Taseko and peers Thompson Creek Metals (NYSE: TC  ) and Tech Resources (NYSE: TCK  ) soared on the news. Given Thompson's molybdenum exposure and Tech's rich resources of copper and other metals, they both seem poised to improve alongside Taseko if China follows through on its promises.

For Taseko to improve, it needs conditions in the global metals markets to get better. If it can then start executing better on its internal operations, Taseko could easily make back a lot of the ground it has lost in its efforts to reach perfection.

Keep searching
No stock is a sure thing, but some stocks are a lot closer to perfect than others. By looking for the perfect stock, you'll go a long way toward improving your investing prowess and learning how to separate out the best investments from the rest.

If you like investing in metals, we've got a stock you should really take a look at. Read the Motley Fool's latest special report on gold to discover the tiny gold stock digging up massive profits. It's free but only available for a limited time.

Click here to add Taseko Mines to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.

Fool contributor Dan Caplinger doesn't own shares of the companies mentioned. The Motley Fool owns shares of Freeport-McMoRan Copper & Gold. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool has a disclosure policy.


Read/Post Comments (2) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On September 21, 2012, at 2:23 PM, ngass wrote:

    In my opinion you often leave out facts (positive or negative) that do not comply with what you want to project. In this example, in your foreward looking statement you left out that Taseko is in the process to obtain permission for a gold-copper mine that will be the largest in Canada worth several Billion Dollars.

    Also, your statement: "Looking forward, Taseko will continue to find itself linked to the world's economic prospects." is childish since most companies in the world are linked to economic prospects, no matter what they are producing. You tried to give it a negative flair.

  • Report this Comment On September 22, 2012, at 10:09 AM, lrubrich wrote:

    A dumb article unless you are short TGB or need to advertise your investor service.

    BTW, you should know TGB is not a gold mining stock yet!

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