Royal Bank of Canada (RY, Financial) has confirmed its hold rating on shares of Newmont Mining Corp. (NEM, Financial) in a research report that the Canadian international financial services company sent to investors May 30, reports sportsperspectives.com.
The Canadian firm has set a target price of $39.00 per share for the biggest gold producer in the U.S.
Royal Bank of Canada’s target price is only 33 cents lower than the average target price of $39.33 per share. The latter is an average of the estimates of 18 analysts who were surveyed on Newmont.
Source: Yahoo Finance
The target price – which represents the share price that is deemed to be reached by the U.S. gold stock on the market within the following 12-month period – ranges between a low of $24 per share and a high of $48 per share.
The target price that the Royal Bank of Canada holds on shares of Newmont represents a nearly 21% upside from the current market value of the U.S. stock that is trading at $32.28 per share.
Newmont is downtrending on the New York Stock Exchange as are many of its peers and lost 5.40% while the VanEck Vectors Gold Miners ETF (GDX) in the same span gained 4.92%.
Newmont has a recommendation rating of 2.5 out of 5. It sits in the middle of a hold and buy recommendation since out of a total of 18 analysts, who were surveyed on Newmont, eight were for a buy recommendation and eight for a hold recommendation.
Source: Yahoo Finance
Newmont represents one of the best buying opportunities in the gold stock industry because through holdings in the biggest gold producer in the U.S., investors get exposure to the changes in the price of the precious metal by way of an assets base that is a strong generator of cash flow and that only a few gold mining companies have today in the industry. This is because Newmont can run its operations at high quality mines, the value of which is sealed by two parameters: gold reserves of 68.5 million ounces and an average grade of 1.2 grams of gold per ton of mineral.
With reference to these two parameters, Newmont is second in ranking after Barrick Gold Corp. (ABX, Financial), the biggest gold producer in the world.
Newmont is the only gold mining company that is part of the Standard & Poor's 500, the index taken as a benchmark when the stock’s returns have to be compared to the performances of the overall stock market.
The other reason that makes me go for Newmont rather than any other gold mining stock is that the U.S. gold producer has a solid balance sheet with nearly $3 billion in cash on hand and securities. Plenty of cash that can be used by the U.S. miner to further upgrade its assets base.
The company has approximately $4.62 billion in debt, but its investors must be reminded that this debt can be refunded according to a very comfortable repayment schedule since 75% of it is not due before 2022.
Newmont derives most of its revenues from operations that are located in friendly mining jurisdictions and in countries where the conditions are usually not hostile to mining activities.
Concerning revenue for the second quarter of fiscal 2017, of which results are scheduled to be released July 25, analysts forecast that the American miner will book revenue for $1.79 billion on average. Estimates of revenue for the second quarter of fiscal 2017 range between a low of $1.74 billion and a high of $1.83 billion.
On the ground of these estimates of revenue, analysts forecast that Newmont will close the second quarter of fiscal 2017 with an average EPS of 28 cents. Fifteen analysts have been surveyed to date on Newmont’s earnings for the second quarter, and their estimates range between a low of 17 cents and a high of 39 cents.
According to the value for the EVO (the enterprise value per ounce of gold reserves) metric, Newmont is cheapest – as shown in the picture below – compared to its most direct peers, Barrick and Goldcorp Inc. (GG, Financial).
The stock has a forward price-earnings (P/E) ratio of 27.73, a price-sales (P/S) ratio of 2.50 and a price-book (P/B) ratio of 1.61. The EV/EBITDA ratio is 7.46.
Disclosure: I have no positions in any stock mentioned in this article.
