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2 Cheap Commodity Stocks to Buy Now

Stephanie Bedard-Chateauneuf

It?s time to buy stocks in the commodity sector. Most of the stocks in this sector are very undervalued and should rebound soon. Interest rates hikes and a rising Canadian dollar tend to boost commodity prices.

Goldcorp Inc. (TSX:G)(NYSE:GG) is a good stock to buy in the gold sector, and Lundin Mining Corp. (TSX:LUN) is an interesting choice in the mining sector. Both stocks are really cheap right now. Let?s take a closer look at those two companies.

Goldcorp Inc.

The world?s fourth-largest gold mining company has been affected by the depressed price of gold. Its share price has fallen by 17% over five years. It is trading just slightly above its 52-week low of $15.56. The stock is cheap right now with a low forward PEG of 0.70.

Goldcorp?s share price is down by more than 12% since the beginning of the year. The gold price begins to rebound as safe-haven demand returns, so Goldcorp?s share price should rise, too.

Goldcorp reported better-than-expected results in its second quarter, helped by lower costs. The Canadian gold producer reported net earnings of US$135 million, or US$0.16 per share. A year ago, the company reported a loss of US$78 million, or US$0.09 per share.

Adjusted earnings came at US$0.12 per share, beating analysts? estimate of US$0.09 per share.

The Vancouver-based company produced 635,000 ounces of gold in the second quarter at a cost of US$800 an ounce. This is a production 4% larger than the 613,000 ounces of gold it produced at a cost of US$1,067 per ounce in the second quarter of 2016.

Goldcorp pays a quarterly dividend of US$0.02 per share for a yield of 0.61%.

Goldcorp currently has a return on equity of 3.48% and a net profit margin of 13.22%. A strong growth rate of 51.36% is expected for the next five years.

Lundin Mining Corp.

Lundin Mining is a diversified base metals company primarily producing copper, nickel, and zinc. More than 60% of its revenue comes from copper. Copper price is rising, which is beneficial to Lundin Mining.

The mining company?s stock returned almost 12% over the last five years and is up 39% year to date. It is trading just slightly below its 52-week high of $9.90. The share price is very cheap right now, with a very low forward PEG of 0.55.

Lundin Mining reported EPS of $0.09 for its second quarter, topping the consensus estimate of $0.06 by $0.03. The company had revenue of $611.6 million during the quarter. Analysts expect that Lundin Mining will post $0.35 earnings per share for the current year.

Lundin Mining has the best balance sheet among its peers, with a cash balance of approximately US$2.1 billion and net cash of US$1.1 billion.

A strong balance sheet gives Lundin the flexibility to acquire assets or pay a dividend. A lot of internal funds gives downside protection in a low commodity price environment or early debt retirement.

The mining company recently disclosed a quarterly dividend of $0.03 per share, which was paid on September 20. This represents a $0.12 annualized dividend for a dividend yield of 1.37%. Lundin Mining started paying a dividend to its shareholders on April 18, 2017.

Lundin Mining has a return on equity of 9.8% and a net margin of 17.63%. A strong growth rate of 43.80% is expected for the next five years.

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Fool contributor Stephanie Bedard-Chateauneuf has no position in any stocks mentioned.

The Next Canadian Superbrand You've Never Heard of...

This small-cap stock is "Hidden in Plain Sight!" It's flying under the radar and is being touted as a "royalty collector" by several of our top Canadian analysts.

Right now you aren't on the list to receive our formal "buy recommendation", so don't delay - simply click here to enter your email address and discover how you can access the exclusive report.

Fool contributor Stephanie Bedard-Chateauneuf has no position in any stocks mentioned.