On December 12th when NIA announced Western Potash (TSX: WPX) at $0.135 as its #1 stock suggestion for 2017, NIA said that it saw practically no risk at $0.135 because WPX was sitting on $0.15 per share in cash with no debt. NIA said that its key breakout point would be $0.21 per share. NIA predicted that after WPX surpasses $0.21 per share, it would explode to a very minimum of $0.33-$0.34 per share within the following 3 to 5 trading days. In the summer of 2015 at the Potash industry’s worst financial point in history, WPX set itself apart from all other Potash exploration companies by successfully raising $80 million from a major Chinese investor at a price of $0.3358 per share – bringing its total money raised since its 2008 IPO up to $221 million at an average price of $0.50 per share!
With Potash market fundamentals making a stunning turnaround in recent months as reflation begins to shift over to the fertilizer industry, WPX could easily blow past $0.3358 per share and return to the $0.50 level in the days/weeks ahead. NIA has very good reason to believe that large new Chinese investors are beginning to pour money into WPX!
On Friday, WPX surpassed its key breakout point of $0.21 and exploded to a high of $0.29 before closing up 32% to $0.27 per share on volume of over 6 million – its second highest volume day in history! For the full week, WPX gained 58.8% on volume of 10.45 million – its highest weekly volume in six years! Already, WPX has gained 100% since NIA’s initial announcement last month at $0.135 per share – and we believe WPX’s next 100% increase from its current price of $0.27 per share could occur just as rapidly as its first 100% increase!
The last time WPX traded this kind of HUGE volume six years ago, it was during a move from $0.36 per share in May 2010 to a high of $1.80 per share in February 2011 for a gain of 400% in nine months. Previously, WPX traded similar volume in 2009 during a move from $0.16 per share in November 2008 to a high of $0.84 per share in June 2009 for a gain of 425% in seven months. By year-end 2017, look for WPX’s total gain from NIA’s December 12th suggestion price of $0.135 per share to break its previous two record runs!
Over the last eight years, WPX’s median closing price has been $0.45 per share, but on a volume weighted basis WPX has averaged a price of $0.77 per share. Therefore, we are unlikely to see any kind of major resistance between here and $0.50 per share.
Incredibly, WPX’s enterprise value is still below the enterprise value of Encanto Potash (TSXV: EPO), a poorly funded, deeply in debt Potash explorer with a smaller Saskatchewan Potash exploration project located north of Regina. Since 2008, WPX has raised 7 1/2 times more money than EPO – establishing WPX as by far the #1 strongest Potash explorer with the best chance of near-term Potash production!
WPX has 463.3 million shares outstanding for a market cap at $0.27 of $125.09 million and after subtracting its $70.86 million in cash it has an enterprise value of only $54.23 million. EPO has 440.82 million shares outstanding for a market cap at $0.13 of $57.31 million and after adding its $7.05 million in debt, then subtracting its $192,000 in cash – it has an enterprise value of $64.16 million.
NIA has created a ratio of WPX’s share price to EPO’s share price going back to the beginning of 2010. Currently, WPX is trading for 2.077X the share price of EPO compared to a trailing seven year median of 3X the share price of EPO – making WPX extremely undervalued at $0.27 per share and almost a sure thing to rise significantly higher in the weeks ahead!
Based on EPO finishing last week at $0.13 per share, WPX has a short-term fundamental fair value of $0.39 per share with short-term upside potential of $0.86 per share.