Joy Global Stock Falls To All-Time Lows As Commodities Continue To Fall

  • Joy Global sales follow commodities prices.
  • Profits are down more than 50% since 2012.
  • Commodities prices are still falling, putting pressure on Joy Global.

Joy Global (NYSE:JOY)  manufactures equipment and provides services for the mining industry.  They make a wide variety of equipment for both surface and underground mining, including conveyor systems, hauling systems, hard rock mining products, roof supports, and shuttle cars.  They were founded in 1884.

Like its customers, Joy Global's fortunes are tied to the price of commodities: oil, gold, silver, copper, iron ore, etc.  Commodity prices have been under heavy pressure for years.  Gold now trades at $1125/ounce, down 38% from its August 2011 high of $1825/ounce.  Silver has had a sharper decline, now trading at $14.75/ounce, down 68% from its April 2011 high of $46/ounce.  Copper is down more than 40% from its high in 2011.  Oil is down more than 50% in the past two years alone.

Consequently, Joy Global's sales have also been under pressure.  In the past two years, sales have fallen 33% from $5.66 billion to $3.78 billion, and profits have been hit harder.  Profits in 2014 were $331 million, down more than 50% from 2012 profits of $762 million.

Joy Global Stock Falls To All-Time Lows

Moving with the price of commodities, the stock has crashed.  Joy Global stock climbed to its all-time high in 2011 at over $100/share.  The stock closed on Tuesday at $16.68, down over 80% from the 2011 high.  It now trades just $3 above its 10-year lows.
JOY stock chart

Joy Global stock price chart by

What Could Impact The Joy Global Stock Now?

After such a sharp multi-year sell-off, is Joy Global now a good buy, or should investors still avoid this stock?  Part of the answer, of course, is based on commodities prices.

Commodities appear to be starting to form a base.  Downward momentum is slowing, changing from down to sideways price action in some, but not all, commodities.  In August, crude oil briefly fell below the December 2014 low before snapping back up to its current price of $48/barrel.  Gold is still in a slight downtrend, but falling much more slowly than the freefall of two years ago.  Silver is also technically still in a downtrend, but just barely.  From the price charts we can't say the downtrend is over, only that it may be over soon.

Will commodities prices ever return to previous levels?  My guess is that they will at some point.  But some analysts are saying they could remain at these levels for the next decade.

Valuation measures are worth noting.  Joy Global's P/E ratio (trailing twelve months) is 7 and its forward P/E ratio is 12 (through October 31, 2016).  The Price-to-Sales ratio is 0.49.  These numbers suggest that Joy Global stock is a good value stock, but only if the financials return to growth -- something they aren't doing now and may not do for some time to come.

Joy Global is classed as a turn-around play.  It will be a fine stock to own with huge upward potential if/when commodities prices start to climb again.  Even if the stock price does not go down further, you don't want to own it if the price just moves sideways for the next ten years.  That would tie up your money when you could be making profits somewhere else.

This is a stock not to own now, but to keep on your watch list.  At some point, Joy Global could again be a fine stock to own.

Gregg Killpack Gregg Killpack   on Amigobulls :
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