Goldcorp Inc. (GG, Financial) rose as much as 1.85% to $14.61 a share in early morning trading.
Just recently, Bank of America Merrill Lynch raise Goldcorp’s price target to $20 per share and Deutsche Bank kept it at a Hold rating for a price target of $16.5 per share.
The stock has climbed 12% so far this year and has outperformed the Van Eck Vectors Gold Miners ETF (GDX, Financial) by 16%:
With ratings by BofA/Merrill Lynch and Deutsche Bank being roughly diametrically opposed with reference to the median target price, their re-rates will leave the mean unmoved at $17.95 per share of Goldcorp.
The average target price of approximately $17.95 is the mean of 22 estimates averaging $12 to $25 per share and represents a 25.2% growth from the current share price.
The recommendation rating is 2.2 out of 5. As of April 2018, about 54.5% of Wall Street’s analysts recommended buying shares of Goldcorp and 41% are for a hold approach. A scant minority is for an underperforming security.
In one week, Goldcorp will release results on production and financials for the first quarter of fiscal 2018. Consensus is for earnings per share of 11 cents on revenue of $879.31 million. Estimates of earnings represent a 2-cent increase from a year ago and those on revenues suggest a flat top line compared to 2017.
A 2-cent growth in earnings translates to an increase of more than 20%. If Goldcorp will meet consensus or indeed beat it, the impact on the market value may be statistically significant.
As of April 18, the stock is trading at valuations that are not creating convenient entering points since the share price is a lot over the 200, 100 and 50-SMA lines:
Furthermore, a RSI (14-days) is approaching the upper average line computed over the trailing 12 months. Even though it is not an indication of overbought levels, the current RSI can be a further sign of a stock that is not trading cheaply.
From the first quarter of fiscal 2018, I expect Goldcorp has improved its Ebitda margin computed over the last 12 months of trading. If in 2017 the Ebitda margin was 37.5% at an average gold price of $1,257.12 per ounce (towards an industry median of 25%) for the 52-weeks through March 31, I suppose a 0.5 to 0.6% advancement to 38%.
A three-month average bullion price of $1,329.28 leads to an average price of about $1,275 per troy ounce over the last twelve months of trading.
With the first quarter results, Goldcorp will also update its balance sheet figures.
GuruFocus assigns Goldcorp a financial strength rating of 5 out of 10 and a profitability and growth rating of 6 out of 10.
GuruFocus also indicated the price-book ratio of Goldcorp is 0.87 times versus an industry median of 2.06 times, and an EV-to-Ebitda ratio of 11.34 versus an industry median of 9.90 times.
During the last quarter of 2017, Pioneer Investments started a position in Goldcorp and bought 2,678,555 shares.
First Eagle Investment has increased its holding by 3.59% to 37,179,979 shares, Caxton Associates, -33.33% to 300,000 shares, John Hussman, -23.08% to 250,000, Jim Simons -46.80% to 2,061,173 shares and Ray Dalio, -19.82% to 270,418 shares.
(Disclosure: I have no positions in any security mentioned in this article.)
