On Monday, Gold Fields Ltd. GFI moved slightly up 0.3% to $3.92 per share from the prevous trading day. The upside came on the heels of an upgrade from Bank of America (BAC).
According to a note research dispatched on Friday, Bank of America raised its rating on the stock in Gold Fields to Buy from a rating of Underperform.
This is the fourth upgrade Gold Fields has received over the last two years. It is preceded by two upgrades from JPMorgan Chase (JPM) last year (Overweight) and on July 12, 2016 (Neutral). In 2016, RBC Capital also upgraded Gold Fields to Outperform, which was released on June 22 of that year.
Over the same span of time, the stock of the South African gold producer got two downgrades. The first negative rating was issued by RBC Capital (Sector Perform) on Dec. 12, 2016. The second downgrade (Sell) was issued by Goldman Sachs on March 24, 2016.
On April 4, 2017, JPMorgan Chase maintained an Overweight rating and issued a price target of $6.3 per unit.
The upgrade from Bank of America will not move the average target price. As of April 17, it is at $4.30 per ordinary ADR of Gold Fields.
The average target price is a mean of four estimates of analysts. The estimates range between a low target price of $2.91 per ADR and a high target price of $6.31 per ADR of Gold Fields.
The average target indicates that consensus expects a 10% upside in the market value of the South African gold stock within the following 52 weeks of trading.
The recommendation rating is 3 out of 5. As of April, one analyst in four is for Buy, one has chosen Hold and two analysts rate it as Underperform.
Gold Fields has fallen 11% so far this year and underperformed the Van Eck Vectors Gold Miners ETF GDX by 7%.
According to the below chart, which is powered by GuruFocus, the share price is underneath the 200, 100 and 50-SMA lines. That indicates that the stock in the South African gold mining company is cheap.
GuruFocus also indicates that the current share price is slightly above the midst of $3.06 to $4.70 52-Week Range per share.
On the NYSE, bidders and askers are agreeing on 0.91 times the book value per share of Gold Fields while the industry stands at an average of 2.06 times.
The EV-to-Ebitda ratio of Gold Fields is 8.07 times versus an industry median of 9.9 times.
This gold stock is not bad if we consider that when gold averaged $1,257.12 an ounce on the London Bullion Market, the company’s operations delivered an Ebitda margin of almost 20%, which was only several percentage points lower than the industry median of 25%.
Of course, there is better choice out there in the gold stock industry than just Gold Fields.If you are considering buying shares, you may be expecting a substantial improvement in the company's first-quarter earnings, which were helped by a rising commodity.
Gold averaged $1,329.28 per troy ounce traded in the first quarter of the current year versus a price per traded ounce of $1,219.357 in the analogous period of fiscal 2017.
That should have delivered an approximately 20% growth in Gold Fields’ Ebitda margin to 24% in the first quarter of 2018. The improvement in the profitability of operations at Gold Fields may be the near-term catalyst.
(Disclosure: I have no positions in any stock mentioned in this article.)
