Is Now the Time to Buy Polymetal International?

LONDON -- I'm always searching for shares that can help ordinary investors like you make money from the stock market. So right now I am trawling through the FTSE 100 and giving my verdict on every member of the blue-chip index. Simply put, I'm hoping to pinpoint the very best buying opportunities in today's uncertain market.

Today I am looking at Polymetal International (POLY) to determine whether you should consider buying the shares at 870 pence. I assess each company on several ratios:

• Price to Earnings: Does the share look like a good value when compared against its competitors?
• P/E to Growth: Does the share look like a good value when factoring in predicted growth?
• Yield: Does the share provide a solid income for investors?
• Dividend Cover: Is the dividend sustainable?

So let's look at the numbers:

The consensus analyst estimate for this year's earnings per share is $1.80 (34% growth), and the estimated dividend per share is $0.54 (80% growth).

Firstly, I should mention that Polymetal has only been listed on the London Stock Exchange in its current form since November 2011. Therefore, the company's historic earnings figures are difficult to establish, and it is not possible for me to calculate a reliable three-year growth rate. In addition, Polymetal has only paid a regular dividend since 2011. Furthermore, I have calculated an estimate for this year's dividend based on the company's target to pay out at least 30% of earnings as a regular dividend to shareholders each year.

Anyway, trading on a projected P/E of 7.3, Polymetal appears to be cheaper than its peers in the mining sector, which are currently trading on an average P/E of around 10.3. Polymetal's P/E and double-digit growth rate give a PEG ratio of around 0.2, which implies that the share price is cheap compared to the near-term earnings growth the firm is expected to produce.

Currently, Polymetal supports a 5.3% dividend yield, which is above the mining-sector average of 2.8%. However, the company's yield figure includes a special dividend of $0.50 a share. With the special dividend excluded, I believe the yield could be closer to 1.5% -- below the sector average. That said, Polymetal is committed to returning cash to shareholders, and management has stated that it will declare a special dividend every year, assuming the company has sufficient free cash flow.

So is now the time to pile into Polymetal?
Polymetal is a precious-metals producer based in Russia and is one of the world's largest silver-producers. In addition, I believe the group is one of the world's most efficient gold-producers. Indeed, during 2012, Polymetal was able to produce an ounce of gold for $691, a full 5% less than the industry's average production cost of $727 per ounce.

Furthermore, it appears that while the majority of Polymetal's peers are struggling with rising production costs, Polymetal has managed to keep costs under control. In particular, during 2012 the company's production costs expanded by only 8% -- significantly less than the rest of the mining industry, which saw costs rise about 18% on average.

Overall, based on Polymetal's solid dividend yield, low production costs, and the current P/E discount to the wider mining sector, I believe now looks to be a good time to buy Polymetal International at 870 pence.

More FTSE opportunities
As well as Polymetal International, I am also positive on the FTSE 100 share highlighted within this exclusive free report. You see, the blue chip in question offers a 5.7% income, its shares might be worth 850 pence versus a current price of 700 pence, and it has just been declared The Motley Fool's top income stock for 2013! Just click here to read the report -- it's free.

In the meantime, please stay tuned for my next verdict on an FTSE 100 share.