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Barrick Gold Corporation, headquartered in Toronto, Canada and founded in 1983 is a publicly-traded gold mining company worth considering. Its market capitalization is huge enough to make it a well-established miner but not that huge to make it unattractive for growth-seeking investors.
Its gold portfolio is well diversified with mines located in the United States, Canada, the Dominican Republic, Argentina, the Democratic Republic of Congo, Tanzania, Côte d’Ivoire, and Mali. And its copper portfolio is spread across mines located in Saudi Arabia, Zambia, and Chile.
In this article, we will examine the forecasts made by Wall Street analysts when it comes to this stock and see if the predictions are justified. We’ll also take a look at this stock through the lens of both someone who wants exposure to the gold mining market and someone looking for standalone growth potential.
Let’s get started…
Stock Forecast for 2023
Based on 23 Wall Street analysts, the short-term future for Barrick Gold Corporation seems positive considering their 12-month forecasts. The 12-median price target of $20.69 per share suggests an 5.45% upside from its April 4, 2023 $19.62 closing price.
At the extreme levels, we have a highest price target at $29 and a lowest price target at $17, suggesting a 47.81% upside and -13.35% downside, respectively. Let us view some fundamentals of the company to understand if such predictions are justified.
First of all, by just looking at the past 10 years, the company’s revenue has remained at about the same level. That’s definitely not a good sign for such a long period.
What’s even more problematic, however, is the fact the company’s net earnings have been erratic in the last decade. With losses in some years and low income in other years, there is no trend to establish some trust, the company’s heading in the right direction. Of course, EPS figures reflect this net income history very accurately.
The company has had positive operating cash flow in recent years, closely reflecting its revenue. However, relatively large charges for depreciation, amortization, and asset write-downs have been an issue.
The company’s margins are also lower than the sector medians, with a gross profit margin of 31.49% and a net income margin of 3.92% compared to sector medians of 29.47% and 7.59%, respectively.
Last, its return on equity based on its TTM net income was 1.85% and the sector median was 11.68%. As for its return on assets, this was 0.94%, while the sector median was 5.40%.
Setting these issues aside, at least the company looks solvent. Based on its most recent filings, its debt is only 0.2 times its equity. Additionally, its interest coverage was 5.1 times and its current ratio was 2.7 times.
Now, when it comes to valuation, things are complicated. GOLD trades at 77.35 times its TTM EPS right now. For context, other gold miners like Franco-Nevada Corporation (FNV) and Agnico Eagle Mines Limited (AEM) trade much lower, at 39.96 and 33.31 times, respectively.
But other metrics make GOLD seem more potentially attractive. Its enterprise value is 6.99 times its TTM EBITDA. FNV and AEM have an EV/EBITDA of 24.20 and 9.68 times, respectively. Additionally, GOLD has a Price to Sales ratio of 2.99 while FNV and AEM have a P/S ratio of 21.26 and 3.89, respectively.
GOLD is also trading at 1.71 times its net tangible assets, while FNV and AEM trade at 4.36 and 1.64 times theirs, respectively. While the company’s figures are favorable compared to others, the premium for the stock may be questionable based on the above results.
Determining whether GOLD is undervalued is not straightforward. Its profitability and growth are uncertain, and different metrics yield different results in terms of valuation. Considering the current uncertainties, it may be wise to exercise caution when evaluating the stock at this time.
There’s no doubt that the company can generate cash flow. It’s another discussion, however, if it can improve its margins and increase its revenue and decrease its expenses.
The stock could be a valuable addition to a diversified gold mining stock portfolio, but the questions are warranted.
In conclusion, Barrick Gold Corporation is a big and well-established gold miner. It has been around for decades and its stock is well covered on Wall Street. In addition, its gold mine portfolio is very well diversified.
However, considering its low margins, slow growth, and current stock price, it may not be a suitable choice for investment at present.
For someone who is looking for exposure to the gold mining industry, GOLD could work in a diversified portfolio of gold mining stocks. However, its valuation appears questionable.
It’s important to conduct your own research or seek the advice of a financial professional before making any decisions regarding this stock. This article aims to provide an overview of Wall Street’s opinion on GOLD and key fundamental information about the company’s business.
Stock projections are just that – projections, and the actual performance of a stock may vary. However, 23 analysts have given their 12-month price forecasts for Barrick Gold Corp. The median target is $20.69, with a high estimate of $29.00 and a low estimate of $17.00. This suggests a potential increase of approximately +5.41% from the April 4, 2023 closing price of $19.63 for the median estimate. The high estimate implies a potential increase of about +47.72%, while the low estimate represents a potential increase of approximately +0.58%.
The largest shareholder of Barrick Gold Corporation is Van Eck Associates Corp. It owns about 80 million shares.
Barrick Gold is not debt free as it has about $5 billion in long-term debt. However, in 2013, its long-term debt was reported at approximately $12 billion and it gradually managed to reduce it over the last ten years.
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