When examining the daily and three-month performance of Newmont Corp (NEM, Financial), investors notice a -1.84% decline in its stock price, contrasting with a 21.5% gain over the last quarter. With a Loss Per Share of $2.67, the question arises: is Newmont fairly valued? This article delves into a valuation analysis to determine the answer, inviting readers to explore the financial nuances of Newmont Corp (NEM).
Company Introduction
Newmont is the world's largest gold miner, with significant developments like the acquisition of Goldcorp in 2019, a joint venture with Barrick, and the recent purchase of Newcrest. With an expansive portfolio across the globe and an expected production of 6.9 million ounces of gold in 2024, the company's strategic moves, such as the likely sale of higher-cost, smaller mines, paint a picture of its operational dynamics. Newmont's stock price of $41.95 is juxtaposed with a GF Value of $44.55, suggesting a close alignment with its fair value. This sets the stage for an in-depth valuation analysis.
Summarize GF Value
The GF Value is a proprietary measure designed to estimate a stock's intrinsic value. It incorporates historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance projections. The GF Value line represents the stock's ideal fair value. If a stock trades significantly above this line, it may be overvalued, suggesting poorer future returns. Conversely, trading below the line may indicate undervaluation and the potential for higher returns.
Currently, Newmont (NEM, Financial) appears to be fairly valued, indicating that its long-term return may closely mirror the company's business growth rate.
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Financial Strength
Before investing, assessing a company's financial strength is crucial to mitigate the risk of permanent loss. Newmont's cash-to-debt ratio of 0.25 ranks lower than the majority of its industry peers, reflecting a fair financial strength score of 5 out of 10. This metric, along with the company's historical debt and cash flow, provides insight into its financial resilience.
Profitability and Growth
Investing in profitable companies with a consistent track record often carries less risk. Newmont has demonstrated profitability in 6 out of the last 10 years, with a commendable operating margin that surpasses two-thirds of its industry counterparts. However, its growth rates in revenue and EBITDA have been less impressive, lagging behind the majority of the Metals & Mining industry.
ROIC vs. WACC
A company's profitability can also be gauged by comparing its Return on Invested Capital (ROIC) against its Weighted Average Cost of Capital (WACC). Newmont's ROIC of 3.58 is currently below its WACC of 7.08, suggesting the company may not be creating optimal value for shareholders.
Conclusion
Overall, Newmont (NEM, Financial) is fairly valued, with a financial condition and profitability that are deemed fair. Yet, its growth lags significantly behind industry standards. For a more comprehensive understanding of Newmont's financial health, one can review its 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
