Gold is soaring on the London Bullion Market. The precious metal closed $1,326.80 per troy ounce on Friday, up nearly $15 an ounce year-to-date and on average $70 per troy ounce from 2017.
This is a sure sign that investing in gold is getting hot again. The weak dollar and expectations of a low real interest rate environment are also boosting its popularity.
U.S. publicly traded producers are also up trending. VanEck Vectors Gold Miners ETF (GDX), for example, is up nearly 1% since the beginning of 2018.
Investors can make direct investments in gold mining companies in order to get exposure to the metal. I would recommend those stocks that analysts predict will experience the highest upside over the next 12 trading months. These gold stocks usually expose the investor to a higher risk than the industry. However, since the precious metal is forecasted to hit $1,380 an ounce, there are many opportunities for success this year.
Investors may want to take a look at a small mining company known as Alio Gold Inc. (ALO, Financial). Analysts give a rating of 2.4 out of 5 and foresee a hefty 61% upside on the stock market. They are forecasting a $5.86 per share price.
The stock is currently trading cheaply at $3.64 per share on the AMEX, which is down 2.7% year-to-date, 4.2% for the 52 weeks through Jan. 12 and 66.5% below the 52-week high of $6.06.
On the 50-SMA line, the stock is a bit higher but it is plainly below the 100 and 200-SMA lines:
The price-book (P/B) ratio is 0.83 versus an industry median of 2.01 and the EV-to-EBITDA ratio is 2.47 versus an industry median of 10.14 times.
The Relative Strength Indicator is 58.20. It is up trending, but its current value is yet an indication of neither overbought nor oversold stock.
Alio Gold's operations have proved to be on average more profitable than the gold stock industry recently. When the yellow metal averaged $1,245 an ounce on the London Bullion Market over the 52 weeks through Sept.30, 2017, Alio Gold’s EBITDA margin of 32% was more than 9 percentage points higher than the industry median. This was recognized by the stock market and shares of Alio Gold outperformed the VanEck Vectors Gold Miners ETF (GDX) by 5.5%.
Alio Gold is a Canadian gold explorer and has only one production mine located in the Mexican state of Sonora. It is known as the San Francisco mine.
Alio Gold produced a volume of 16,070 ounces of gold in the last quarter of 2017. In 2017, it had a guidance volume of 83,558 ounces, according to a company news release.
Greg McCunn, Alio Gold’s CEO, said that the company cannot be better positioned at the moment to deliver consistent figures on 2018 gold production and that the focus will be on cost reduction and on reaching the highest possible operations level at the San Francisco mine.
The company also says that a volume of 16,067 gold ounces were sold in the last quarter of 2017 at an average price of $1,274 per ounce for a total quarterly revenue of $20.6 million.
Alio Gold expects to release guidance on the 2018 production and costs at the beginning of February. Other financial results will be disclosed Feb. 21. Alio Gold had about $51.5 million in cash on hand as of Dec. 31, 2017.
Alio Gold is also engaged in the advancement of the Ana Paula project in the Guerrero State of Mexico and exploration activities at the Ejutla property in the Mexican state of Oaxaca.
(Disclosure: I don’t have any position in Alio Gold.)
