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Alberto Abaterusso
Alberto Abaterusso
Articles (1382) 

Bank of America Downgrades Eldorado Gold

Eldorado Gold is at incredibly cheap valuations

April 16, 2018 | About:

The stock in Eldorado Gold Corp. (NYSE:EGO) was downgraded by Bank of America.

According to a research note dispatched by the U.S. bank, shares of the Canadian mid-tier gold producer were downgraded to Underperform from a previous rating of Neutral.

That is the third negative rating Eldorado Gold Corp. got over the last seven months of trading.

The previous two downgrades were released by JPMorgan Chase (JPM), which provided a downgrade from Overweight to Neutral on Nov. 13, 2017, and Bank of America (BAC), which provided a downgrade from Buy to Neutral on Oct. 31, 2017.

Eldorado Gold Corp. has been upgraded three times over the same span of time.

The first time was last year on Sept. 25 when Credit Suisse raised its previous rating of Underperform to Neutral.

The second time was on Jan. 17 when Macquarie released an upper Outperform rating compared to the previous Neutral.

The last time was this year Jan. 26 when Credit Suisse raised its rating from Underperform to Neutral.

Bank of America’s downgrade leaves the average target price unchanged at $1.98 per ordinary share of Eldorado Gold Corp. That is a mean of 12 estimates ranging from $1.22 to $4.47.

The average target price represents a 110.6% growth from the current share price of 94 cents. The 94 cents per share is the quantification of a mean recommendation rating of 3 out of 5.

The recommendation rating ranges between 1 (Strong Buy) and 5 (Sell). This means that Eldorado Gold Corp. is on average perceived as a Hold.

In addition, as of April, three analysts out of 14 recommend buying shares of Eldorado Gold Corp and eight analysts suggested a Hold on the stock. Three analysts said the stock in the Canadian gold mining company will underperform within the next 52-weeks of trading.

Eldorado Gold Corp has fallen 34% so far this year, underperforming the Van Eck Vectors Gold Miners ETF (GDX) by 30%, according to the chart powered by GuruFocus:

Eldorado has a market capitalization of $769.4 million or 94 cents per share.

The stock is trading cheaply. As you can see in the chart by GuruFocus, the share price is below the 200, 100 and 50-SMA lines.


The 52-weeks range is 80 cents to $3.78 per share.

The price-book ratio is 0.2 times versus an industry median of 2.06 times and the EV-to-Ebitda is 14.78 times towards an industry median of 9.9 times.

For the first quarter of fiscal 2018, which ended on March 31, consensus is for an EPS of one cent on a revenue of $139.95 million. The EPS is predicted to be flat on a year-over-year basis while the revenue is expected to increase 25.10% from the comparable of fiscal 2017.

Estimates on earnings are 6 and range between a 1 cent loss and a 4 cents net profit per diluted share. Estimates on the first quarter 2018 revenue are 2 and they range between a low of $138.34 million and a high of $141.56 million.

During the last quarter of 2017, Ray Dalio (-5.30% to 282,531 shares) and Ronald Muhlenkamp (-9.49% to 70,000 shares) reduced their holdings of Eldorado Gold Corp.

Joel Greenblatt and Jim Simons sold out while Pioneer Investments started a position in Eldorado Gold Corp. buying 1,769,042 shares.

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

About the author:

Alberto Abaterusso
If somebody asks what being a value investor means, Alberto Abaterusso would answer, “The value investor is not just the possessor of the security that represents the company, but he is the owner of that company. As an owner of the company the value investor is actively involved in the dynamics of that company and his first concern is how to have sales progressively growing. Also, the value investor is probably one of the most demanding persons in the world concerning sales.”

Abaterusso is a freelance writer based in The Netherlands. He primarily writes about gold, silver and precious metals mining stocks. His articles have also been widely linked by popular sites, including MarketWatch, Financial Times, 24hGold, Investopedia, Financial.org, CNBS, MSN Money, Zachs, Reuters and others. Alberto holds an MBA from Università degli Studi di Bari (Italy), Aldo Moro.

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