Value-focused investors are always on the hunt for stocks that are priced below their intrinsic value. One such stock that merits attention is Centerra Gold Inc (CGAU, Financial). The stock, which is currently priced at 5.6, recorded a loss of 4.29% in a day and a 3-month decrease of 2.47%. The stock's fair valuation is $10.61, as indicated by its GF Value.
Understanding GF Value
The GF Value represents the current intrinsic value of a stock derived from our exclusive method. The GF Value Line on our summary page gives an overview of the fair value that the stock should be traded at. It is calculated based on three factors:
- 1. Historical multiples (PE Ratio, PS Ratio, PB Ratio and Price-to-Free-Cash-Flow) that the stock has traded at.
- 2. GuruFocus adjustment factor based on the company's past returns and growth.
- 3. Future estimates of the business performance.
Unpacking the Risks
However, investors need to consider a more in-depth analysis before making an investment decision. Despite its seemingly attractive valuation, certain risk factors associated with Centerra Gold should not be ignored. These risks are primarily reflected through its low Piotroski F-score and a Beneish M-Score of -0.88 that exceeds -1.78, the threshold for potential earnings manipulation. Furthermore, the company's revenues and earnings have been on a downward trend over the past five years, which raises a crucial question: Is Centerra Gold a hidden gem or a value trap? These indicators suggest that Centerra Gold, despite its apparent undervaluation, might be a potential value trap. This complexity underlines the importance of thorough due diligence in investment decision-making.
Decoding the Beneish M-Score
Developed by Professor Messod Beneish, the Beneish M-Score is based on eight financial variables that reflect different aspects of a company's financial performance and position. These are Days Sales Outstanding (DSO), Gross Margin (GM), Total Long-term Assets Less Property, Plant and Equipment over Total Assets (TATA), change in Revenue (∆REV), change in Depreciation and Amortization (∆DA), change in Selling, General and Admin expenses (∆SGA), change in Debt-to-Asset Ratio (∆LVG), and Net Income Less Non-Operating Income and Cash Flow from Operations over Total Assets (∆NOATA).
Company Overview
Centerra Gold Inc is a gold mining and exploration company engaged in the operation, exploration, development, and acquisition of gold properties in Asia, North America, and other markets worldwide. The company manages its reportable operating segments by a combination of geographic location and products. The Kyrgyz Republic segment includes the operations of the Kumtor Gold Project. The Turkish segment represents the development of the OksUt Project. The North America Gold- Copper segment represents the operations of the Mount Milligan Mine. The North America Molybdenum segment includes the operations of the Langeloth processing facility and the care and maintenance activities of the Endako and Thompson Creek Mines.
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