2 FTSE 250 stocks I'd dump today

Since the end of 2015, shares in KAZ Minerals(LSE: KAZ) and Antofagasta(LSE: ANTO) have charged higher as sentiment towards the mining sector has improved. Indeed, over the past two years, shares in these two miners have risen by 660% and 87% respectively excluding dividends.

But after this impressive run, I believe it could now be time for investors to turn their backs on these companies and take profits.

Fizzling out

Kaz's run since the end of 2014 has made the company one of the best-performing stocks in the mining sector, and it's easy to see why. The company's fundamentals have improved dramatically over the period and the firm's first-half results for the six months ended 30 June confirm that this trend is continuing.

Today the company reported that during the half, gross revenues increased 2.3 times to $873m while earnings before interest tax depreciation and amortisation increased 273% to $429m. Operating profit hit $291m, up 330% year-on-year. Rising profitability allowed the company to pay down $227m of debt during the period taking net debt to $2.4bn or around 2.8 times EBITDA. Management is expecting debt to fall further in the months ahead.

For the full year, City analysts are expecting the company to report a pre-tax profit of £305m, which works out at 55.6p per share giving a valuation of 11.6 times forward earnings at current prices. This valuation isn't particularly demanding, and analysts have pencilled in further earnings per share growth of 34% for 2018.

However, while shares in Kaz might look attractive based on current City estimates, the company's earnings are still subject to the whims of the copper market, and there's no guarantee copper prices will remain supportive for the next two years.

So, even though Kaz's fundamentals are improving, and shares in the company might rise further from current levels, booking profits after a gain of more than 600% seems prudent.

Not worth the money

Kaz looks cheap compared to the company's current and projected growth. Shares in Antofagasta on the other hand, look anything but.

Antofagasta is one of the most expensive miners trading on the London market. At a forward P/E of 23.8, the shares support a valuation that is more suited to a high growth tech company, than a Chilean copper producer. Granted, analysts are expecting the company's earnings per share to grow by 45% 2017, but even after accounting for this growth, it's difficult to justify the group's high valuation.

Just like Kaz, Antofagasta's profits are dependent on copper prices, so income is volatile. If copper prices suddenly lurch lower, Antofagasta's high valuation will come back to haunt the company as it's likely the shares will suffer more than the rest of the sector as the company's earnings growth evaporates.

Still, the one thing to like about Antofagasta is the company's dividend payout. At the time of writing, analysts are projecting a dividend payout of 14p per share for 2017, giving a yield of 1.6%. Based on current earnings projections, this payout is covered 2.7 times by earnings per share, leaving plenty of room for payout growth or special dividends. Unfortunately, this dividend potential isn't enough to convince me that investors should hold on to the company.

Time to sell?

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Rupert Hargreaves has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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