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Alberto Abaterusso
Alberto Abaterusso
Articles (1478) 

Hold Shares of Eldorado Gold Corp

The stock is not cheap but is well positioned to hit $6.4 per share within 52 weeks

March 19, 2019 | About:

Gold started to uptrend again. Following a negative first week of March for the London market where the bullion lost more than $19 per troy ounce or 1.5%, the yellow metal regained $12.9 per troy ounce or 1% over the last six days, closing at $1,305.60 an ounce on Monday.

The closing price, which was just 0.5% from the March high of $1,311.95, drove the cumulative average up to $1,303.15 per troy ounce, topping by nearly $35 an ounce or 2.7% the cumulative average price of $1,268.49 for 2018.

Gold Futures - April 19 (GCJ9) is also trading higher over the last couple of days. The contract was up 0.31% to $1,305.55 per troy ounce in early trading on Tuesday.

In order to benefit from an expected rally in the price of the commodity following the plan of the U.S. Federal Reserve to keep the federal-funds rate target unaltered at 2.25-2.5% likely until the end of 2019, gold miner investors may want to hold shares of Eldorado Gold Corp. (NYSE:EGO)(TSX:ELD​).

The Canadian mid-tier gold producer appeals more than bonds and other fixed-income securities when interest rates are low. Thanks to a rising commodity, shares of Eldorado Gold Corp. have topped the VanEck Vectors Gold Miners ETF (GDX) by about 45% so far this year.

Eldorado Gold Corp. currently produces the yellow metal from its mines in Canada, Turkey and Greece. Canadian mineral assets contributed 10%, Greek assets gave 13.4% and Turkish assets added 76.6% of the total production of 349,147 ounces of gold in 2018.

The company also produced concentrates of silver at 172 grams per ton, 6.7% of lead and 9.3% of zinc from 37,091 tons of mineral. However, gold is the main commodity for Eldorado Gold Corp. In 2018 it enabled the Canadian operator to report gold revenues of $386 million or 84% of total revenue of $459 million. Due to impairment charges recorded for the Kisladag mine in Turkey and the Olympias mine in Greece, the miner recorded a loss of $361.9 million or $2.28 per share resulting from continuing operations.

Besides the production of gold, silver, lead and zinc, Eldorado Gold Corp is also a developer of mineral assets that it acquires and an explorer for mineral properties in North America, Greece, Turkey, Romania, Serbia and Brazil.

On the New York Stock Exchange, the share price was trading around $4.4 at close on Monday for a market capitalization of roughly $697.4 million, a price-book ratio of 0.21 compared to an industry median of 1.62 and an EV-Bitda ratio of 12.52 versus an industry median of 8.71.

The share price at close on Monday was slightly above 200-day simple moving average line, significantly above the 100- and 50-day simple moving average lines. It was 74.6% off the 52-week range of $2.52 and 37.5% from the 52-week high of $6.05.

The stock is not cheap. Further, the 14-day Relative Strength Indicator of 55.71 suggests the stock is neither oversold nor overbought.

On the Toronto Stock Exchange, the share price was around C$5.86 ($4.39) at close on Monday for a market capitalization of roughly C$930.6 million, a price-book ratio of 0.28 and an EV-Ebitda of 16.

The share price at close on Monday was above the 200-, 100- and 50-day simple moving average lines. It was 703% off the 52-week range of 73 cents and 11% from the 52-week high of C$6.5.

The 14-day Relative Strength Indicator of 58 suggests the stock is neither oversold nor overbought.

Eldorado Gold Corp is not cheap on the Canadian stock market either.

Wall Street issued a hold recommendation rating with an average target price of $6.37 per share of Eldorado Gold Corp.

At 19%, the Ebitda margin of Eldorado Gold Corp. is still a little bit below the industry median of 24%, shareholders can however reasonably expect a margin improvement following 16% growth in production this year. The company guided for 390,000 ounces to 420,000 ounces of gold to be produced in 2019. Of course, gold needs to stay supportive throughout the whole year, but as described before, the right factors are on the table because 2019 should be positive for the precious metal and its producers.

Eldorado Gold Corp is also targeting production of 500,000 ounces of gold in 2020.

Disclosure: I have no positions in any securities mentioned.

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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