The Royal Bank of Canada (RY, Financial) released new ratings for Barrick Gold Corp. (ABX, Financial), Goldcorp Inc. (GG, Financial) and Newmont Mining Corp. (NEM, Financial) with new target prices last Thursday.
Barrick Gold has been upgraded by analysts at Royal Bank of Canada from Sector Perform to Outperform with a target price per share of $23 as reported by Barron’s.
Royal Bank of Canada’s upgrade is the sixth over a total of 11 ratings delivered by analysts over the last 12 months and followed by six upgrades; the most recent one is that released by the Deutsche Bank (from hold to buy) on March 10, and by two downgrades. During this period Berenberg (to sell), Morgan Stanley (to equal-weight) and Citigroup (to buy) initiated a coverage on the world’s largest gold producer.
The new target price represents a 10.7% upside from the average target price of $20.77 per share, which now ranges between a low price of $15.00 and a high price of $28.94 per share. Barrick Gold is trading at $18.99 per share, and the reason the firm sees a 21.1% increase in the market value of the gold stock resides in “an improved production and cost outlook for Barrick Gold” that will enable to the miner to generate “strong free cash flow in 2017-18, placing the company in solid position to pay down debt and advance its organic growth projects,” Stephen Walker and Melissa Oliphant, analysts at Royal Bank of Canada, said for Barron’s.
The recommendation rating for Barrick Gold is 2.4, and it is a mean of 25 analysts surveyed. As of today, 12 analysts out of a total of 25 recommend holding shares of Barrick Gold.
The world’s largest gold producer is uptrending and gained nearly 18% year to date. The price-book (P/B) ratio is 2.79, the price-sales (P/S) ratio is 2.65, and the forward price-earnings (P/E) ratio is 22.08.
The Canadian miner has an Enterprise Value of $27.51 billion, and the EV/EBITDA ratio is 6.57.
Goldcorp has also been upgraded by the Canadian firm from underperform to sector perform with a price target per share of $17. This is the fourth upgrade for Goldcorp in a row over the last 12 months. The most recent one was released by TD Securities (hold to buy) on Dec. 21, 2016.
Royal Bank of Canada’s target price per share represents a 6.8% upside from the average of $18.15 per share, which ranges between a low price of $13.00 per share and a high price of $28.00 per share, and an 11.4% upside from the current share price of $15.26.
Goldcorp had a recommendation rating of 2.4, which ranges between 1.0 (strong buy) and 5.0 (sell), as of Monday. The recommendation rating is a mean of a total of 24 analysts’ opinions. Eleven of them recommended holding shares of Goldcorp while 10 suggested increasing the position in the Canadian miner.
Royal Bank of Canada's decision to upgrade Goldcorp likely resides in the belief that the Canadian gold producer will successfully achieve its target by enhancing future production and cash flow with 20% and cutting costs with 20% over the next five years which will positively impact the market value of the stock.
Goldcorp has a P/B value of 0.97, a P/S ratio of 3.81 and a forward P/E ratio of 31.14. The Enterprise Value/EBITDA ratio is 12.91.
In contrast, Newmont Mining has been downgraded by Royal Bank of Canada, the second one over the last 12 months. Since March 2016, the U.S.'s largest gold producer has been upgraded three times and downgraded twice. It seems that analysts at Royal Bank of Canada think that the recent strategic alliance entered by Newmont Mining with Goldstrike Resources Ltd., and the new contributions of Long Canyon, Merian (Suriname) and Cripple Creek & Victor (Colorado) to the company’s total future production, will not add so much to the market value of the U.S. gold stock.
However, Royal Bank of Canada sets a target price of $38 per share which represents a 2.8% upside from the average target price per share of $39.05. The latter is a mean of 19 analysts’ calls and ranges between a low target price per share of $25.00 and a high target price per share of $48.00.
Newmont Mining is currently trading at $33.02 per share with a P/B ratio of 1.64, a P/S ratio of 2.62 and a forward P/E ratio of 26.63.
The EV/EBITDA ratio is 26.63.
The recommendation rating is 2.4. Nine analysts out of a total of 19 recommend to buy Newmont Mining Corporation while seven analysts suggest to hold shares of the U.S. miner.
Disclosure: I have no positions in any stock mentioned in this article.
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