Newmont Corp (NEM, Financial) recently experienced a daily decrease of 3.75% in its stock price, yet it has gained an impressive 38.12% over the past three months. With a reported Loss Per Share of $2.67, investors and analysts are keen to determine: is Newmont fairly valued? This article delves into the intrinsic valuation of Newmont (NEM), guided by the proprietary GF Value, to answer this pivotal question.
Company Overview
Newmont, the world's largest gold miner, has undergone significant transformations, including the acquisition of Goldcorp in 2019, a joint venture with Barrick, and the recent purchase of Newcrest in November 2023. These strategic moves have positioned Newmont with 17 wholly or majority-owned mines and interests in two joint ventures across the Americas, Africa, Australia, and Papua New Guinea. For 2024, the company is projected to produce approximately 6.9 million ounces of gold. Despite these expansions, Newmont plans to divest from its higher cost, smaller mines, which represent around 20% of its forecasted sales for 2024. Additionally, Newmont produces substantial quantities of copper, silver, zinc, and lead as byproducts. As of December 2023, the company boasted about two decades worth of gold reserves alongside significant byproduct reserves.
Understanding GF Value
The GF Value is a unique measure that estimates the true intrinsic value of a stock. It incorporates historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, along with future business performance estimates. This valuation suggests that Newmont's stock, currently priced at $42.39 per share and with a market cap of $48.90 billion, aligns closely with its fair value of $44.43. This assessment positions Newmont as fairly valued, indicating that its future return potential is likely to mirror the rate of its business growth.
Financial Strength and Stability
Investing in companies with robust financial health reduces the risk of permanent capital loss. Newmont's cash-to-debt ratio stands at 0.25, which is lower than 82.1% of its peers in the Metals & Mining industry. This figure, along with a financial strength rating of 5 out of 10 by GuruFocus, indicates that Newmont's financial health is fair but could be improved.
Profitability and Growth Prospects
Despite challenges, Newmont has maintained profitability over six of the past ten years, with recent revenues hitting $13.20 billion. The company's operating margin stands at 8.76%, which is more favorable than 68.5% of its industry counterparts. However, its 3-year average revenue growth rate lags behind 75.08% of its peers. Additionally, Newmont's EBITDA growth rate has decreased by 62.4% over the past three years, ranking lower than 92.24% of similar companies.
Return on Invested Capital Versus Cost of Capital
An essential measure of profitability is the comparison between the Return on Invested Capital (ROIC) and the Weighted Average Cost of Capital (WACC). Newmont's ROIC over the past year was 3.59, underperforming its WACC of 6.57. This indicates that the company is not generating adequate returns relative to its capital costs.
Conclusion
Overall, Newmont (NEM, Financial) appears to be fairly valued at its current market price, reflecting its market position and financial metrics. Investors should consider both the financial strength and growth metrics before making investment decisions. For further details on Newmont's financials, visit Newmont's 30-Year Financials.
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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.
