Newmont Mining Corp. (NEM, Financial) didn't budge as a result of a downgrade by analysts at RBC Capital. In Wednesday afternoon trading, it was up over $38 a share.
RBC Capital downgraded the U.S. gold stock to underperform from a previous rating of sector-perform, according to a research note dispatched on Monday, March 2.
This sounds like selling Newmont Mining Corp and lock in a gain after the stock has soared nearly 18%, outperforming the Van Eck Vectors Gold Miners (ETF) by 16.4% over the last 12 months of trading.
Despite that, shares of the biggest producer of gold in U.S. are keeping trading higher. On Tuesday, shares jumped 0.63% to $38.22.
Source: Yahoo Finance
This is a sign that the market generally believes that the ride is far from over.
Newmont Mining Corp has seen a lot over the past five years in terms of operational improvements and balance sheet solidity. The company has already harvested significant progresses in the adjusted EBITDA and free cash flow in 2017. The EBITDA margin is 35.5% versus an industry median of 25%.
But with the underlying commodity predicted to steadily trade higher this year compared to the average price level of 2017, the financial issues can only get better.
Therefore, the company should have the financial resources to continue its strategy of building a long-term valued portfolio of assets for many years at a lower cost.
Continuing to invest in exploration activities is crucial to the U.S. miner. Thanks to that, Newmont Mining has already been capable of adding 6.4 million ounces of the yellow metal to the company’s total proven and probable mineral reserves. This reserve base increased so well that now Newmont Mining Corp. is at the same level as the largest producer of gold in the world, Barrick Gold Corp. (ABX).
On Dec. 31, 2017, Newmont Mining had reserves for 68.5 million ounces of attributable gold while Barrick Gold Corp held 64.55 million ounces.
The U.S. miner also pays a dividend that being linked to the price of the commodity will be likely increased over 2018. This will lead to additional upsides in the market value of the stock.
Other indicators on Newmont Mining Corporation:
- The stock is currently above the 200 and 100-SMA lines, but below the 50-SMA line
- The 52 Week Range is 31.42 to $42.04 per share
- The RSI (14-days) is 49.64 of a 30 to 70 range according to GuruFocus
- The price-book (P/B) value is 1.93 times while the industry has a mean of 2.06 times
- The EV-to-Ebitda ratio is 8.57 times versus an industry median of 9.90 times
In addition, RBC Capital has also reduced its target price on Newmont Mining Corp by 4.4% to $43 per share. That trim will drag the average target price a little bit down to $43.76 per share. The range has a low of $37 per share and a high of $50 per share.
The recommendation rating is 2.4 out of 5.
(Disclosure: I have no positions in any security mentioned in this article.)
