1. How to use GuruFocus - Tutorials
  2. What Is in the GuruFocus Premium Membership?
  3. A DIY Guide on How to Invest Using Guru Strategies
Alberto Abaterusso
Alberto Abaterusso
Articles (1342) 

Is It Time to Increase Yamana Gold?

Several catalysts should propel the share price up

September 13, 2018 | About:

For the rest of 2018 and full 2019, gold miner investors should considering increasing their positions in Yamana Gold Inc. (NYSE:AUY).

The Canadian mid-tier gold producer's stock has not hit a new 52-week low yet, but the share price is just a few cents above the lowest price listed by the technical indicator. Yamana Gold is trading cheaply on the New York Stock Exchange. Following a 12% drop in the market value for the 52 weeks through Sept. 12 the share price is $2.50 as of Thursday morning, and is below the 200-, 100- and 50-day simple moving average lines.

The below chart, which is powered by GuruFocus, illustrates what I just described.

Yamana Gold appears to trade at compelling valuations. The price-book ratio is 0.58 versus an industry median of 1.74, and the EV-to-Ebitda ratio is 4.78 compared to an industry median of 9.3. Those are two of the most used ratios to screen for value in the gold mining industry.

Furthermore a 14-day Relative Strength Index of 28.4 is suggesting that the stock is near to oversold levels and that a correction to the upside may happen soon. The technical indicator usually ranges between 25 and 75.

As of September 2018, there were 14 analysts surveyed on Yamana Gold. Five of them recommended buying the stock and seven suggested holding it. Two said it will underperform over the next 52 weeks.

The average target price is $3.86, which is a nearly 55% growth from current valuations.

Investors need to know that the catalysts that may propel the share price up are the following:

The first is production, which is projected to exceed 900,000 ounces of gold. If that production target is accompanied by a rising commodity, Yamana Gold will beat consensus on sales and adjusted net earnings, producing a positive surprise with a strong impact on the market value of the stock.

Also, a higher ore grade of metal at the El Peñón deposit in Chile and a higher throughput expected at Cerro Moro in Argentina should both increase the production of silver and copper. 

It is possible that the current market valuation is influenced by fears that the government of Argentain could implement a tax on the metal that will be traded abroad. Argentina announced the imposition of an export tax because the country has a target of fiscal stability to reach. The Argentinian government's proposal needs to be translated into legislation before the export tax is effective.

However, significant devaluation of several local currencies and the stipulation of foreign exchange options contracts should put the Canadian miner in a strong position. Therefore, the company will generate positive cash flow, not only for the rest of 2018, but also for the entire year of 2019, and even if the Argentinian export tax becomes effective. 

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.

Rating: 0.0/5 (0 votes)


Please leave your comment:

Performances of the stocks mentioned by Alberto Abaterusso

User Generated Screeners

Jason201777Screen 2/20/2019
Stephen NeumeierGreenblatt Low Beta
jbucheliHighly Leveraged
jbostwickosv growth 50% gpa MidCAP Best
pbarker46Start screening here
Get WordPress Plugins for easy affiliate links on Stock Tickers and Guru Names | Earn affiliate commissions by embedding GuruFocus Charts
GuruFocus Affiliate Program: Earn up to $400 per referral. ( Learn More)

GF Chat