TRX

We rate TRX GOLD Corp (TRX) as a Buy with a composite score of 72.2/100 at a current price of $1.86. The stock scores above average across the majority of our six quantitative factors and ranks #50 out of 7,333 stocks in our universe, reflecting a favorable risk-reward profile.

The rating is primarily driven by strength in momentum (96th percentile) and quality (83th percentile), which together account for the majority of the composite score. Offsetting weakness in stability (34th percentile) and investment (37th percentile) tempers our overall conviction. We assign a Narrow Moat rating (62/100), Low uncertainty, and Exemplary capital allocation.

Key items to watch: sustainability of the current growth rate. Any material change in these dynamics could warrant a reassessment of our rating. The moat trend is stable, which suggests the competitive landscape is stable for now.

TRX GOLD Corp holds a top-quartile position (#3 of 50) within the Mining sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 72.2/100 places it at rank #50 in our full 7,333-stock universe. At $104M in market capitalization, TRX GOLD Corp is a small-cap player in the Mining space, which limits certain scale advantages but may allow for more agile strategic execution.

The near-term outlook is constructive, with revenue growing at 40% and momentum in the 96th percentile confirming positive market sentiment and institutional accumulation. The combination of strong top-line growth and favorable price dynamics suggests the company is executing well on its growth strategy. Investment factor at the 37th percentile indicates reinvestment patterns that investors should monitor for sustainability.

The margin cascade tells an important story: gross margins of 42% (-1.6pp vs sector) narrow to operating margins of 28% (+15.5pp vs sector) and net margins of 11.4%, yielding a gross-to-net conversion rate of 27%. This conversion rate is typical for the sector, suggesting a standard cost structure without notable efficiency advantages or disadvantages.

At a current price of $1.86, TRX GOLD Corp appears undervalued relative to its fundamentals. Our value factor score of 77/100 reflects a composite assessment across multiple valuation metrics including price-to-earnings, price-to-book, EV/EBITDA, and price-to-sales ratios relative to both sector peers and the broader market. The stock screens as attractively priced on a majority of these measures, suggesting the market may be underappreciating the underlying fundamentals.

The stock currently trades at EV/EBITDA of 8.2x (at a premium), P/B of 10.6x, P/S of 2.2x. We evaluate these multiples in the context of both absolute levels and sector-relative positioning to form our valuation view.

We assign a Low uncertainty rating to TRX GOLD Corp. The company exhibits strong financial stability with a beta of 0.65, conservative leverage (2% D/E), and a stability factor in the 34th percentile. The predictable nature of the business model and solid financial position reduce the range of potential outcomes, giving us confidence in our fair value estimate.

Specific risk factors that inform our assessment include: below-average price stability (34th percentile); low beta of 0.65 — while defensive, this may indicate limited upside participation in bull markets. Each of these factors independently widens the distribution of potential outcomes, and in combination they create a risk profile that demands careful position sizing. The stability factor at the 34th percentile and quality factor at the 83th percentile provide a quantitative summary of the overall risk landscape.

Key risk mitigants include: healthy gross margins of 42% provide a buffer against cost pressures; conservative leverage (2% D/E) limits balance sheet risk. These factors partially offset the identified risks and provide downside protection in adverse scenarios. On balance, the risk-reward profile is favorable for long-term investors.

We rate TRX GOLD Corp's capital allocation as Exemplary. Management demonstrates a strong track record of balancing reinvestment with shareholder returns, evidenced by returns on equity of 54.2%, disciplined leverage (2% D/E). Exemplary allocators typically generate returns on equity above 20% while maintaining debt-to-equity below 50% — TRX GOLD Corp meets this high bar.

The balance sheet remains conservatively managed, providing financial flexibility for opportunistic investments while maintaining a margin of safety for shareholders. We note that the combination of 22.4% return on assets and controlled leverage suggests management is deploying capital at rates well above the cost of capital — the hallmark of exemplary stewardship.

In summary, TRX GOLD Corp receives a Buy rating with a composite score of 72.2/100 (rank #50 of 7,333). Our quantitative framework assigns a Narrow Moat (62/100, trend: stable), Low uncertainty, and Exemplary capital allocation. The average factor score across quality, value, momentum, stability, and investment is 66/100.

Our analysis supports a constructive view on TRX GOLD Corp. The combination of identifiable competitive advantages, low uncertainty, and exemplary capital allocation creates a risk-reward profile that favors accumulation at current levels. We recommend investors consider adding this name to portfolios aligned with the stock's risk profile.