There is a new stock rating for Newmont Mining Corp. (NEM, Financial)
The miner is among the largest gold producers in the world with a guidance of 5.15 million ounces.
On April 11, Deutsche Bank informed the market about its decision to keep the stock on a Hold rating. The German firm has released a new price target of $41 per share.
On April 13, Bank of America Merrill Lynch raised its price target 6.1% to $52.00 while maintaining a rating of Buy on shares.
The two ratings will move the average price target a few cents up to $44.67 per ordinary share. The average is a result of 18 estimates, which range between a low of $37 and a high of $52 per share.
As of April 2018, Newmont Mining Corp is seen as a Strong Buy by two analysts and as a Buy by nine analysts. Of a total of 18 analysts, seven analysts recommend a Hold approach.
According to GuruFocus’ chart, Newmont Mining Corp has risen 8% so far this year, outperforming the Van Eck Vectors Gold Miners ETF (GDX, Financial) by 12%.
The market value of 533.72 million shares outstanding is $22.09 billion on the New York Stock Exchange. Institutions hold 86.76% of Newmont Mining Corp’s total shares outstanding. Blackrock Inc. has a 14.55% stake and the Vanguard Group Inc. has a stake of 10.41%. They are the top shareholders of the company. Holdings are as of Dec. 30.
Insiders hold 0.69% of their own company. The pie chart powered by GuruFocus illustrates the top direct holders of Newmont Mining Corp.
The enterprise value of Newmont Mining is $23.85 billion. That is a measure of the total value of the U.S. mining company, resulting from a total debt that the market values at $4.06 billion and cash-on-hand and securities of $3.32 billion.
GuruFocus indicates that the EV-to-Ebitda is 9.23 times versus an industry median of 9.90 and that the EV-to-Revenue is 3.26 times towards an industry median of 2.47 times. When those two ratios are combined, they yield an Ebitda margin of 35.3%. The industry has an Ebitda margin of 25%.
Many analysts are striving to determine how the miner's ability to obtain cheap capital influences its profitability. With a debt-to-equity ratio of 38%, the U.S. miner seems to be more leveraged than the industry. A leveraged business might be an issue as interest rates rise.
During the bull market for gold, which started in 2016, Newmont Mining has grown its revenues while its most direct peers, such as Barrick Gold Corp (ABX, Financial) and Goldcorp Inc. (GG, Financial) have seen their top lines decline. With this trait, it is believed that Newmont Mining Corp. is likely to outperform the market as long as gold will continue to up-trend.
Newmont Mining Corp has grown its Ebitda by 100.7% in 2017 while Barrick Gold Corp’s Ebitda grew only 17.8%. At Goldcorp, the issue declined 11.1%.
Newmont Mining’s revenue grew over the last two years while those of Barrick Gold and Goldcorp Inc. have down trended.
Newmont Mining:
NEM data by GuruFocus.com
Barrick Gold Corp:
ABX data by GuruFocus.com
Goldcorp lnc:
GG data by GuruFocus.com
The charts suggest that, at Newmont Mining Corp., the leverage won’t be an issue, as long as operations can guarantee to maintain the interest coverage ratio (5.43 according to GuruFocus) well above the threshold of 1.5.; Also, the company needs to maintain its ability to fund new mineral projects, raise investment in exploration activities and increase the dividend.
Newmont Mining has a forward dividend and yield of 56 cents and 1.35%. The industry has a median forward dividend yield of 1.18%. The U.S. miner has increased its quarterly dividend by 180% to a 14-cent quarterly distribution in the first quarter of 2018 from 5 cents quarterly distribution of free cash flow in the second quarter of 2017. Helped by a rising commodity, the company aims to increase the dividend 50% in 2018. That is one of the catalysts for the following 52-weeks of trading.
The investment of capital at Newmont Mining Corp. has for sure paid off. The U.S. miner has been capable of adding about 6.4 million ounces of the yellow metal to its assets base. FOr the first time in five years, the asset base has completely counterbalanced the depletion of proven and probable gold reserves due to mining.
The price of the commodity is crucial to the profitability of Newmont Mining’s operations.
Indications of growth in developed and emerging markets, along with a physical deficit in the balance of demand and supply for gold, are painting rosy prospects for the bullion and for Newmont Mining.
At least for the next five years, the U.S. miner anticipates milking a steady level of gold production from its reserves and at competing costs.
For the next three years, GuruFocus reports that analysts foresee a nearly 4% average annual growth in earnings from $1.26 per share in full fiscal 2018 to $1.99 per share in full fiscal 2020. That will be backed by a 27% average growth in revenue from $6.971 billion in full fiscal 2018 to $7.249 billion in full fiscal 2020. Yahoo Finance indicates a 9.14% annual growth rate in earnings for the next five years compared to 0.12 of the S&P 500.
Newmont Mining Corp. (NYSE:NEM) is trading at $41.38 per share. Newmont Mining Corp. stock has a price-book ratio of 2.08 times versus an industry average that according to GuruFocus is 2.06 times.
Now Newmont Mining is not so cheap since the share price is only a few cents far from the 52-week high of $42.04 per share and well above the 52-week low of $31.42 per share.
In addition, the share price is underneath the 200, 100 and 50-SMA lines:
The relative strength indicator is 64.77 of a 20 to 80 range.
(Disclosure: I have no position in any stock mentioned in this article.)
