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Analysts’ Favorites: A Look at the Top 10 Gold Miners

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Part 4
Analysts’ Favorites: A Look at the Top 10 Gold Miners PART 4 OF 11

Newmont Mining Is on Analysts’ Wish Lists: Here’s Why

Analyst ratings for NEM

Newmont Mining (NEM) is the world’s second-largest gold producer and is the only gold company included in the S&P 500 (SPY) (SPX). It has significant operations in North America, South America, Australia, and Africa. For more information on Newmont Mining, please read An investors’ guide to Newmont Mining Corporation.

Newmont Mining Is on Analysts’ Wish Lists: Here’s Why

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Newmont Mining is covered by 19 Wall Street analysts. Of these analysts, 58% rated its stock a “buy,” 37% gave “hold” recommendations, and 5% gave “sell” ratings on the stock. The implied upside potential for Newmont Mining is 8.6% based on its current target price of $40.74. 

The upside potential for its close peers is higher. Barrick Gold (ABX), Goldcorp (GG), and Yamana Gold have upside potentials of 24.4%, 29.4%, and 35.8%, respectively.

Returns for NEM

Newmont Mining (NEM) stock has gained 10.1% year-to-date through the end of September 2017. Its performance is on par with the average of senior gold miners. Newmont Mining has emerged as a stronger and leaner corporation after shedding its non-core assets. 

Its project pipeline remains one of the strongest in the sector (GDX), which is better than those operated by Kinross Gold (KGC), AngloGold Ashanti (AU), and Barrick Gold. NEM’s debt has also decreased significantly from its peak in 2011. With its latest debt payoffs, it has reduced its net debt more than 70% since 2013.

Valuations

Newmont Mining stock is currently trading at the forward EV-to-EBITDA1 multiple of 8.9x, which reflects a premium of 18.8% to its close peers. However, its EBITDA margin is lower than that of Barrick Gold. 

There are other factors helping the stock valuation. Its strong project pipeline and better-than-expected execution of projects are among these factors. Consistent and rapid progress toward debt reduction is another factor helping NEM stock.

  1. enterprise value to earnings before interest, tax, depreciation, and amortization
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