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Where Newmont Mining Ranks among Gold Miners Today

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Analyst ratings for NEM

Newmont Mining (NEM) is the world’s second-largest gold producer and the only gold company included in the S&P 500 (SPY) (SPX). For more information on Newmont Mining, check out Market Realist’s An Investors’ Guide to Newmont Mining.

NEM’s stock is being covered by 18 Wall Street analysts today, of which 61% recommend a “buy” for the stock, while 39% recommend a “hold.” The implied upside potential for Newmont Mining is 23.5% based on its current target price of $42.81.

The upside potentials of its close peers are higher, however. Barrick Gold (ABX), Goldcorp (GG), and Yamana Gold (AUY) have upside potentials of 33.2%, 45.9%, and 38.2%, respectively. (You can also read the series How Will Newmont Mining’s 3Q17 Results Drive Its Future? for more on NEM’s 3Q17 performance and the outlook.)

NEM’s returns

Newmont stock has gained 1.8% YTD (year-to-date) as of December 11, 2017. On average, this performance has been better than its senior gold mining peers over the same period. The company has emerged as a leaner and more operationally efficient fimr after its portfolio optimization. Its financial leverage has also declined, which had been a major investor concern.

Meanwhile, its project pipeline is one of the strongest in the sector (GDX)—better than those operated by AngloGold Ashanti (AU), Kinross Gold (KGC), and Barrick Gold (ABX).

Valuations

Newmont has a current forward EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation, and amortization) multiple of 7.8x, which reflects a significant premium of 21.5% to the senior gold mining peer average. NEM is also trading at a slight premium of 5.4% to its historical multiple.

The stock’s higher-than-average multiple is most likely supported by a strong project pipeline and a better-than-expected execution of projects. Consistent and rapid progress toward debt reduction could also help NEM stock going forward.

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