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Barrick (GOLD) Gains 19% in 6 Months: Should You Buy the Stock?
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Barrick Gold Corporation's (GOLD - Free Report) shares have shot up 19.2% in the past six months, outperforming the S&P 500 Index’s return of 8.2%. Expectations of strong earnings in the second quarter on the back of a rally in gold prices and higher expected gold production appear to have catalyzed this bullishness.
GOLD is currently trading at a roughly 8% discount to its 52-week high of $19.45, reached on Jul 17, 2024.
Technical indicators for Barrick show strong bullish momentum. GOLD has been incessantly trading above the 200-day simple moving average (SMA) since Jun 18, 2024. The stock also eclipsed its 50-day SMA on Jul 3, 2024. Notably, the 50-day SMA continues to read higher than the 200-day moving average since the golden crossover on Apr 29, 2024, indicating a bullish trend.
Barrick Trades Above 50-Day SMA
Image Source: Zacks Investment Research
Is the time right to buy GOLD’s shares for potential upside? Let’s take a look at the stock’s fundamentals.
Barrick Well Placed on Key Growth Projects
Barrick, one of the world’s biggest gold miners, with production of around 4.05 million ounces of gold in 2023, is well-positioned to benefit from the progress in key growth projects that should significantly contribute to its production. Its major gold and copper growth projects, including Goldrush, the Pueblo Viejo plant expansion and mine life extension, Donlin Gold, Fourmile, Lumwana Super Pit and Reko Diq, are currently in execution.
These projects are advancing per schedule as well as within budget, which underpins the next generation of profitable production. The restart of the Porgera mine would offer further upside, supporting the company’s planned production ramp-up through 2024.
Strong Liquidity, and Attractive Dividend Yield & Payout
Barrick has a robust liquidity position and generates healthy cash flows, which position it well to take advantage of attractive development, exploration and acquisition opportunities, as well as drive shareholder value and reduce debt. At the end of the first quarter of 2024, Barrick’s cash and cash equivalents were around $3.9 billion. It also generated an operating cash flow of $760 million and a free cash flow of $32 million.
Surging gold prices should translate into strong profit margins and free cash flow generation. Gold prices are hitting record highs this year, and the yellow metal has been among the best-performing assets. Gold has rallied roughly 18% this year, driven by strong demand from central banks, a dovish Fed interest rate outlook, global uncertainties and a surge in safe-haven demand thanks to geopolitical tensions.
Prices skyrocketed to surpass the $2,500 per ounce level for the first time ever on Aug 2, 2024, as ebbing inflation raised hopes of a U.S. interest rate cut in September. Increased tensions in the Middle East and concerns over an economic slowdown also fueled safe-haven demand.
Moreover, GOLD offers a healthy dividend yield of 2.2% (above the S&P 500′s average dividend yield of roughly 2%) at the current stock price. Its payout ratio is 45% (a ratio below 60% is a good indicator that the dividend will be sustainable), with a five-year annualized dividend growth rate of 17.4%.
Attractive Valuation
GOLD’s attractive valuation should beckon investors seeking value. The stock is currently trading at a forward 12-month earnings multiple of 12.97X, lower than its five-year median. This represents a roughly 13.4% discount when stacked up with the industry average of 14.98X.
Image Source: Zacks Investment Research
Earnings Estimates Shooting Higher
Earnings estimates for Barrick have been going up over the past 60 days, reflecting analysts’ optimism. The Zacks Consensus Estimate for 2024 and 2025 have been revised upward over the same time frame. As the earnings estimates move higher, the stock is likely to follow suit.
The Zacks Consensus Estimate for earnings for 2024 is currently pegged at $1.16, suggesting year-over-year growth of 38.1%. Moreover, earnings are expected to register 32.6% growth in 2025.
Image Source: Zacks Investment Research
An Underperformer
Barrick’s price performance has been lackluster this year despite the rally in gold prices. The stock is down 1% year to date, underperforming the industry’s 19.3% increase and the S&P 500’s rise of 12.4%. Moreover, it has underperformed its peers, Newmont Corporation (NEM - Free Report) , Kinross Gold Corporation (KGC - Free Report) and Agnico Eagle Mines Limited (AEM - Free Report) , which have racked up a gain of 17.2%, 44.6% and 37%, respectively. With GOLD shares trading below its 52-week high, there is much room for upside.
YTD Price Performance
Image Source: Zacks Investment Research
Wrapping Up
Barrick’s growth initiatives, actions to boost production, solid financial health, attractive valuation and bullish technicals paint a promising picture. A healthy growth trajectory, rising earnings estimates and a safe dividend yield are the other positives. We recommend investors to accumulate this Zacks Rank #2 (Buy) stock as it has upbeat growth prospects.
Image: Bigstock
Barrick (GOLD) Gains 19% in 6 Months: Should You Buy the Stock?
Barrick Gold Corporation's (GOLD - Free Report) shares have shot up 19.2% in the past six months, outperforming the S&P 500 Index’s return of 8.2%. Expectations of strong earnings in the second quarter on the back of a rally in gold prices and higher expected gold production appear to have catalyzed this bullishness.
GOLD is currently trading at a roughly 8% discount to its 52-week high of $19.45, reached on Jul 17, 2024.
Technical indicators for Barrick show strong bullish momentum. GOLD has been incessantly trading above the 200-day simple moving average (SMA) since Jun 18, 2024. The stock also eclipsed its 50-day SMA on Jul 3, 2024. Notably, the 50-day SMA continues to read higher than the 200-day moving average since the golden crossover on Apr 29, 2024, indicating a bullish trend.
Barrick Trades Above 50-Day SMA
Is the time right to buy GOLD’s shares for potential upside? Let’s take a look at the stock’s fundamentals.
Barrick Well Placed on Key Growth Projects
Barrick, one of the world’s biggest gold miners, with production of around 4.05 million ounces of gold in 2023, is well-positioned to benefit from the progress in key growth projects that should significantly contribute to its production. Its major gold and copper growth projects, including Goldrush, the Pueblo Viejo plant expansion and mine life extension, Donlin Gold, Fourmile, Lumwana Super Pit and Reko Diq, are currently in execution.
These projects are advancing per schedule as well as within budget, which underpins the next generation of profitable production. The restart of the Porgera mine would offer further upside, supporting the company’s planned production ramp-up through 2024.
Strong Liquidity, and Attractive Dividend Yield & Payout
Barrick has a robust liquidity position and generates healthy cash flows, which position it well to take advantage of attractive development, exploration and acquisition opportunities, as well as drive shareholder value and reduce debt. At the end of the first quarter of 2024, Barrick’s cash and cash equivalents were around $3.9 billion. It also generated an operating cash flow of $760 million and a free cash flow of $32 million.
Surging gold prices should translate into strong profit margins and free cash flow generation. Gold prices are hitting record highs this year, and the yellow metal has been among the best-performing assets. Gold has rallied roughly 18% this year, driven by strong demand from central banks, a dovish Fed interest rate outlook, global uncertainties and a surge in safe-haven demand thanks to geopolitical tensions.
Prices skyrocketed to surpass the $2,500 per ounce level for the first time ever on Aug 2, 2024, as ebbing inflation raised hopes of a U.S. interest rate cut in September. Increased tensions in the Middle East and concerns over an economic slowdown also fueled safe-haven demand.
Moreover, GOLD offers a healthy dividend yield of 2.2% (above the S&P 500′s average dividend yield of roughly 2%) at the current stock price. Its payout ratio is 45% (a ratio below 60% is a good indicator that the dividend will be sustainable), with a five-year annualized dividend growth rate of 17.4%.
Attractive Valuation
GOLD’s attractive valuation should beckon investors seeking value. The stock is currently trading at a forward 12-month earnings multiple of 12.97X, lower than its five-year median. This represents a roughly 13.4% discount when stacked up with the industry average of 14.98X.
Earnings Estimates Shooting Higher
Earnings estimates for Barrick have been going up over the past 60 days, reflecting analysts’ optimism. The Zacks Consensus Estimate for 2024 and 2025 have been revised upward over the same time frame. As the earnings estimates move higher, the stock is likely to follow suit.
The Zacks Consensus Estimate for earnings for 2024 is currently pegged at $1.16, suggesting year-over-year growth of 38.1%. Moreover, earnings are expected to register 32.6% growth in 2025.
An Underperformer
Barrick’s price performance has been lackluster this year despite the rally in gold prices. The stock is down 1% year to date, underperforming the industry’s 19.3% increase and the S&P 500’s rise of 12.4%. Moreover, it has underperformed its peers, Newmont Corporation (NEM - Free Report) , Kinross Gold Corporation (KGC - Free Report) and Agnico Eagle Mines Limited (AEM - Free Report) , which have racked up a gain of 17.2%, 44.6% and 37%, respectively. With GOLD shares trading below its 52-week high, there is much room for upside.
YTD Price Performance
Wrapping Up
Barrick’s growth initiatives, actions to boost production, solid financial health, attractive valuation and bullish technicals paint a promising picture. A healthy growth trajectory, rising earnings estimates and a safe dividend yield are the other positives. We recommend investors to accumulate this Zacks Rank #2 (Buy) stock as it has upbeat growth prospects.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.