Gold Fields Predicts 2017 income

Gold Fields Limited (GFI, Financial) is down trending and stood at a 2.80% loss to $3.82 before closing on Friday on the New York Stock Exchange.

Gold Fields predicts lower earnings for full year of fiscal 2017 compared to a year ago, triggering a further depreciation of a stock that was already descending since the start of the year.

Gold Fields is a cheap buy compared to the majority of its peers. The South African gold stock is trading its book value per share at 0.9 times versus an industry median of 2.01 times and has an EV-to-Ebitda ratio of 3.90 times. The industry has an average EV-to-Ebitda ratio of 10.14 times. The current share price is only 4 cents above the midst of a $2.86 to $4.70 52-week range.

For the 52-weeks through Feb. 9, Gold Fields gained 12.02% and outperformed the VanEck Vectors Gold Miners ETF (GDX) by 23.13%. The stock is now trading below the 200, 100 and even the 50-SMA line.

Source: Yahoo Finance

The Relative Strength Indicator (14-days) is 36.14 of a 20-80 range. The curve of the indicator is down trending. This means that the stock is heading to oversold levels.The general down trend in the financial markets since the appointment of the new Fed Chairman, Jerome Powell, may still cause additional depreciation.

With an average target price of $4.55 per share, analysts foresee a 19% growth in the market value of Gold Fields from the current levels. I would wait a bit longer to either start a position or increase an existing one to get exposure to the precious metal through Gold Fields.

For the entire year of 2017, Gold Fields forecasts the following year over year variations in the different categories of the company’s earnings:

Headline earnings per share or HEPS is a non-GAAP measure of the income statement’s bottom line; for fiscal 2017 consensus is for 19 cents per share. This is a mean of nine estimates of analysts who were surveyed. The estimates range between a low of 11 cents and a high of 27 cents, according to MarketWatch.

The company reports that the basic bottom line of Gold Fields’ income statement is predicted to be a loss for fiscal 2017. This is mainly the result of charges for impairments at South Deep and provisions to settle class action litigation. The reversal of impairments booked by the miner at Cerro Corona and at Arctic Platinum, plus the sale of Darlot, were not enough to prevent the estimated loss.

Gold Fields also reports that the life of Cerro Corona mine (Peru) has been successfully extended to 2030 and that the attributable production of gold equivalent for full fiscal 2017 and its last quarter are expected at 2.16 million ounces (+0.7% from 2016) and at 546,000 ounces (-3.7% from the previous quarter). Gold Fields’ guidance on the attributable production of gold equivalent was of 2.1 million to 2.15 million ounces.

The South African miner expects that at $1,088 per ounce and at $955 per ounce, the all-in costs and all-in sustaining costs for full fiscal 2017 will be both below target, which is good.

The financial results for full fiscal 2017 are expected to be published by Gold Fields Wednesday Feb. 14.

Among the gold mining stocks, you can find a better choice than Gold Fields in order to get exposure to the metal. However, since this stock has already proven to outperform on average its industry in terms of both equity’s appreciation and ebitda margin (ttm), I wouldn’t neglect this option during portfolio re-allocation for 2018.

When gold averaged $1,274 per troy ounce on the London Bullion Market, Gold Fields ebitda margin (ttm) was 40.5% versus an industry median of 22.8%.

(Disclosure: I have no positions in any security mentioned in this article.)