- B2Gold (NYSEAmerican:BTG) — Strong operational performance and cheap multiples will continue to sustain the gold mining company
- SSR Mining (NASDAQ:SSRM) — While the top and bottom-line growth are estimated to decelerate in 2022, SSRM offers strong profit margins
- Barrick Gold (NYSE:GOLD) — Planned maintenance and operation hiccups weighed on GOLD’s throughput, but there is still upside ahead
- Equinox Gold (NYSEAmerican:EQX) — The completion, on time and on budget, of the new Santa Luz mine in Brazil brings additional tailwinds to the stock
- Agnico Eagle Mines (NYSE:AEM) — The gold firm trades at a slight premium compared to peers but profitability is expected to enhance significantly this year.
- Newmont (NYSE:NEM) — Analyst ratings are lagging the strong stock performance of the world’s leading gold company, but strong bottom-line growth provides renewed upside
- Royal Gold (NASDAQ:RGLD) — The precious metal stream company offers a compelling profit margin of 40.2% in 2022, one of the highest in the gold industry
Gold stocks have outperformed equity markets in the past few months, amid a confluence of factors. Ramping inflation, recession risks and the war in Ukraine lifted interest for the yellow metal.
Gold tends to perform well during market turmoil, as it is considered a hedge against volatility. Besides, agricultural commodity prices soared after the Russian invasion of Ukraine, prompting investors to seek refuge in the safe-haven assets, such as gold. The Federal Reserve’s monetary policy tightening is another catalyst for gold prices. Indeed, gold’s traditional store of value gets more appealing to investors when interest rates rise.
Gold stocks, measured by the SPDR Gold MiniShares (NYSEARCA:GLDM) as a proxy, lifted 9.8% year-to-date to $39 per share. In the meantime, the SPDR S&P 500 Trust ETF (NYSEARCA:SPY) dipped 8.3% over the period.
In this context, here is a list of gold stocks that get the thumbs up from analysts and set to continue to outperform the equity market.
|AEM||Agnico Eagle Mines||$65.75|
Gold Stocks: B2Gold (BTG)
B2Gold is a Canadian mining company operating gold mines in Mali, Namibia and the Philippines. Since the beginning of the year, BTG shares outperformed the broader market and its complex, expanding 29.43% to $4.97 per share.
The company announced April 14 that total gold production for Q1 2022 was 5% above budget to 209,365 ounces in the period. This strong performance was due to higher processed grades in the Masbate Mine in the Philippines, where production came 11% above budget to 59,764 ounces.
With this robust report, the consensus of analysts remains positive on BTG’s equity story, proposing a 12-month average target price of $6.21 per share, symbolizing an attractive upside of 24.95% per share.
Despite this strong performance, BTG stock has one of the cheapest valuations of gold stocks. Indeed, the gold company trades at a forward enterprise value (EV) on earnings before interest, taxes, depreciation and amortization (EBITDA) of only 4.49 times and a price-to-earnings (P/E) ratio of 14.1.
SSR Mining (SSRM)
SSR Mining is a gold mining company with four high-quality development and producing assets located in the U.S., Turkey, Canada and Argentina.
In 2021, SSRM’s assets produced approximately 794,000 gold-equivalent ounces. Last week, SSRM announced the completion of the Taiga Gold acquisition, consolidating a 100% interest in the Fisher property and adding five new prospective properties, where to date, four separate high-grade gold discoveries have been made.
SSR shares surged 40.44% since the beginning of the year to $24.10. Yet, analysts expect additional upside on the stock. SSRM stock has an average target price of $24.79 per share, a potential of 2.86% from its last closing price.
The company’s net income is however projected to decelerate 27.3% in 2022 to 317 million CAD ($251.2 million). Revenues are expected to decline moderately, down 6.7% year-on-year to 1.75 billion CAD. Despite that, SSRM has a healthy estimated profit margin of 18.1% in 2022.
In addition, SSRM trades at a low 2022e EV/EBITDA of 6.45x and is anticipated to offer a dividend yield of 1.05% over the year.
Gold Stocks: Barrick Gold (GOLD)
Barrick Gold is a Canadian gold and copper mining company holding an interest in 14 gold mines including six Tier 1 gold assets.
Since the beginning of the year, GOLD stock advanced robustly, gaining 35.92% to $25.38 per share. The company recently released gold production figures for the Q1 2022, coming lower than Q4 2021 numbers, amid planned maintenance in the Turquoise Ridge mine, mine sequencing in Tongon, and higher-grade underground ore stockpile depletion in the Carlin and Cortez mines.
The consensus of analysts remains bullish on GOLD’s prospects, estimating a 12-month average target price of $26.42 per share or an upside of 4.84%.
While Barrick’s throughput weakness is expected to dissipate as the year progresses, net income is forecasted to decelerate moderately in 2022, down 4% year-on-year to 1.94 billion CAD.
GOLD’s estimated profit margin of 16.2% in 2022 remains robust and should continue to support the shares of the gold specialist. Besides, GOLD stock trades at reasonable multiples, posting a forward EV/EBITDA of 6.86x, and is expected to deliver a yield of 2.19% this year.
Equinox Gold (EQX)
Equinox Gold is another Canada-based mining company with a focus on gold. EQX stock advanced 33.63% year-to-date to $8.77 per share, slightly lagging gold stocks.
The company began operations at the new Santa Luz mine in Brazil in March 2022, after completing the project on time and on budget. With an annual production of approximately 100,000 ounces of gold per year, EQX stock is set for additional upside going forward. Besides, EQX’s top line is expected to advanced 11% this year to $1.2 billion and 15.2% to $1.38 billion in 2023.
EQX’s profitability is projected to decelerate vigorously from a net margin of 51.4% in 2021 to 4.58% in 2022. However, EQT’s profit margin is estimated to bounce in 2023 to 10.2%, amid gold throughput ramp-up in its new mine.
Analysts see renewed upside on EQX shares, offering an average target price of $9.46 per share, representing an appreciation potential of 6.29% in the next 12 months. EQX stock is, however, more expensive than other gold stock. The company is currently trading at 8x 2022e EV/EBITDA, but exchanges at more stretched metrics in terms of P/E, with a forward ratio of 29.7x.
Gold Stocks: Agnico Eagle Mines (AEM)
Agnico Eagle Mines is a gold miner engaged in producing precious metals, with operations in Europe, North American and Latin America. AEM is well-positioned to benefit from gold market strength over the medium term.
AEM stock increased 27.15% since the beginning of the year to $65.8 per share. Agnico Eagle has a strong buy rating, and Wall Street analysts offer a $68.03 target price, representing a potential appreciation of 3.39%.
The mining company’s top-line growth is estimated to increase significantly this year, up 55.4% year-on-year to $5.94 billion. In the meantime, bottom-line growth should advance even faster, up 74.6% in 2022 to $948 million, equivalent to an annual profit margin of 16%.
With these positive developments, AEM stock is exchanging at a premium compared to gold stocks, trading at 9.5x 2022e EV/EBITDA and 30.3x forward P/E. Nevertheless, AEM also delivers a moderate dividend yield, estimated at 2.11% for 2022.
Newmont Mining is one of the world’s leading gold companies and a producer of copper, silver, zinc and lead. NEM has a yearly gold production of over 6.5 million ounces and a world-class portfolio of assets in North America, South America, Australia and Africa.
In the past month, Jefferies, UBS, and Raymond James raised NEW’s price target to, respectively, $72, $78 and $82 per share.
NEM stock performed strongly year-to-date, jumping about 40% to $85.42 per share and lifted more than 15% in the past month.
The consensus of analysts lags behind the strong performance of the gold miner and the average target price of NEM shares stands at $72.59 per share, a downside of 14.4% from the current price. Nevertheless, NEM is set to continue to benefit from gold’s bullishness and investors should consider the high price target of $96 per share as NEM’s next target price.
In addition, NEM stock’s fundamentals are expected to strengthen significantly this year. While net sales are projected to advance moderately, up 6.7% to $13.04 billion, Newmont’s bottom line should soar 119.9% to $2.56 billion, boosting its profit margin to 19.7% in 2022.
In terms of valuation, NEM shares have more stretched multiples than gold peers, trading at 10.3x forward EV/EBITDA and 25x 2022e P/E. However, Newmont delivers a reasonable projected dividend yield of 2.66% in 2022.
Gold Stocks: Royal Gold (RGLD)
Royal Gold is one of the world’s leading precious metals stream and royalty companies, with an interest in approximately 187 properties on five continents.
After posting a record performance in 2021, due to strong performance in several key assets of its portfolio, the company recently announced 2022 gold production guidance for 2022 between 220,000 and 240,000 ounces per year, a volume slightly lower than 2021 actual performance.
Since the beginning of the year, Royal Gold shares outperformed the gold complex and gold stocks, after soaring 39% to $143.42 per share. With this strong performance, the average target price of RGLD stock stands at $147 per share, representing a marginal upside of 1.43% from the last close. However, Royal Gold has a high price target of $175, representing a 20.7% appreciation potential.
In addition, the precious metal stream company offers a compelling profit margin of 40.2% in 2022, one of the highest in the gold industry. RGLD is expected to significantly enhance its net cash position this year, up 250% to $483 million, enabling it to consider acquiring additional stakes in precious mining projects.
RGLD shares trade at a premium compared to gold mining stocks, exchanging at a high forward EV/EBITDA of 17.5x and 34.7x P/E. Nevertheless, this gold stream pure-player is set for additional upside as gold markets tighten.
On the date of publication, Cristian Docan did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.