The gold industry is currently experiencing a surge in demand. This is driven by factors such as the growing demand for gold jewelry, anticipations of interest rate cuts, persistent purchases made by central banks worldwide, strong OTC investment and increased buying in the derivatives market, and the growing appeal of gold as a safe asset. These factors have propelled gold prices to record highs recently.
Gold’s prospects appear promising due to heightened geopolitical risks in the Middle East, the uncertain macroeconomic environment, and its reputation as a safe-haven asset. Therefore, investors could consider buying fundamentally strong gold stocks such as Kinross Gold Corporation (KGC), Centamin plc (CELTF), and Centerra Gold Inc. (CGAU).
Before exploring the fundamentals of these stocks, let’s first understand what’s shaping the gold industry’s prospects.
According to the World Gold Council, gold is expected to give stronger returns this year than what it had previously anticipated in its last released outlook. According to its Gold Demand Trends report for the first quarter, total global gold demand rose 3% year-over-year to 1,238t, marking the strongest first quarter since 2016.
Moreover, mine production increased 4% year-over-year to 893t, a first-quarter record. World Gold Council’s Louise Street said, “Looking ahead, 2024 is likely to produce a much stronger return for gold than we anticipated at the beginning of the year, based on its recent performance.”
“Should the price level off in the coming months, some price-sensitive buyers may re-enter the market, and investors will continue to look to gold for a safe haven asset as they seek clarity around rate cuts and election results,” he added.
With a steady increase in the demand for gold as jewelry and long-term investment, the gold market is estimated to reach 6.32 kilotons by 2029, growing at a 7.4% CAGR. Ed Yardeni, the President of Yardeni Research, believes that if inflation returns, gold prices could soar through the end of 2025 and rise as high as $3,500 by the end of next year.
Considering these conducive trends, let’s examine the fundamentals of the three Miners - Gold stock picks, beginning with the third in line.
Stock #3: Kinross Gold Corporation (KGC)
Headquartered in Toronto, Canada, KGC acquires, explores, and develops gold properties principally in the U.S., Brazil, Chile, Canada, and Mauritania.
KGC’s trailing-12-month CAPEX / Sales of 28.60% is 271.9% higher than the industry average of 7.69%. Its trailing-12-month Return on Common Equity and Return on Total Capital of 6.99% and 5.63% are 13.7% and 15.1% higher than the industry averages of 6.15% and 4.89%, respectively.
KGC’s metal sales for the fiscal fourth quarter that ended December 31, 2023, increased 3.7% year-over-year to $1.12 billion. Its adjusted operating cash flow from continuing operations stood at $407.40 million.
For the same quarter, its adjusted net earnings from continuing operations attributable to common shareholders and net earnings from continuing operations per share stood at $140 million and $0.11, up 29.4% and 22.2% from the prior-year quarter, respectively.
Analysts expect KGC’s revenue for the quarter that ended March 31, 2024, to increase 11.6% year-over-year to $1.04 billion. Its EPS for the year ending December 31, 2025, is expected to grow 13% year-over-year to $0.46.
The company surpassed the consensus EPS estimates in each of the trailing four quarters, which is impressive. Over the past nine months, the stock has gained 43.3%, closing the last trading session at $6.55.
KGC’s strong fundamentals are reflected in its POWR Ratings. It has an overall B rating, equating to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
It has a B grade for Value, Sentiment, and Quality. It is ranked #10 out of 42 stocks in the Miners - Gold industry. To see the additional POWR Ratings of KGC for Growth, Momentum, and Stability, click here.
Stock #2: Centamin plc (CELTF)
Headquartered in Saint Helier, Jersey, CELTF explores, mines, and develops gold and precious metals in Egypt, Burkina Faso, Côte d'Ivoire, Jersey, the United Kingdom, and Australia.
CELTF’s trailing-12-month EBITDA margin and net income margin of 44.23% and 10.35% are 162.6% and 111.9% higher than the industry averages of 16.84% and 4.89%, respectively.
For the fiscal year that ended December 31, 2023, CELTF’s revenue stood at $891.26 million, up 13% year-over-year. Its profit for the year after tax attributable to the owners of the parent and earnings per ordinary share attributable to owners of the parent increased 27.3% and 26% from the year-ago value to $92.28 million and 7.82 cents, respectively.
In addition, its free cash flow for the fiscal first quarter that ended March 31, 2024, stood at $10.35 million.
Street expects CELTF’s revenue for the year ending December 31, 2024, to increase 12.8% year-over-year to $1.01 billion. The stock has gained 44.4% over the past six months to close the last trading session at $1.48.
CELTF’s POWR Ratings reflect its positive prospects. It has an overall A rating, equating to a Strong Buy in our proprietary rating system.
CELTF has a B grade for Value, Stability, and Quality. Within the same industry, it is ranked #3. Click here for the additional POWR Ratings for CELTF (Growth, Momentum, and Sentiment).
Stock #1: Centerra Gold Inc. (CGAU)
Headquartered in Toronto, Canada, CGAU acquires, explores, develops, and operates gold and copper properties in North America, Turkey, and internationally.
On February 14, CGAU announced that the company and its subsidiary, Thompson Creek Metals Company Inc., struck an additional agreement with RGLD Gold AG, a subsidiary of Royal Gold, Inc., regarding the Mount Milligan Mine. The agreement results in a mine life extension to 2035 and establishes favorable parameters for potential future mine life extensions.
CGAU’s President and CEO, Paul Tomory, commented, “We are pleased to announce a mutually beneficial additional agreement with Royal Gold, which has allowed us to immediately unlock additional reserves beyond the current mine life. Extending Mount Milligan’s mine life by two years is a key first step in our strategy to realize the full potential of this cornerstone asset in a top-tier mining jurisdiction.
CGAU’s trailing-12-month gross profit margin and levered FCF margin of 32.93% and 21.19% are 13.8% and 297.1% higher than the industry averages of 28.94% and 5.34%, respectively.
CGAU’s revenue for the fiscal fourth quarter that ended December 31, 2023, increased 63.2% year-over-year to $340 million. Its free cash flow stood at $111 million, compared to a free cash deficit of $25.30 million in the year-ago quarter.
For the same quarter, its adjusted net earnings and net earnings per share stood at $61.20 million and $0.28, compared to adjusted net loss and net loss per share of $13.70 million and $0.06, respectively.
For the quarter that ended March 31, 2024, CGAU’s revenue is expected to increase 30.3% year-over-year to $295.21 million. Its EPS for the year ending December 31, 2024, is expected to grow considerably year-over-year to $0.56.
The company surpassed consensus revenue estimates in three of the trailing four quarters. Over the past three months, the stock has gained 12.9% to close the last trading session at $6.04.
CGAU’s POWR Ratings reflect this promising outlook. It has an overall rating of A, equating to a Strong Buy in our proprietary rating system.
CGAU has an A grade for Growth and a B for Value and Quality. Within the Miners - Gold industry, it is ranked #2. To see CGAU’s Momentum, Stability, and Sentiment ratings, click here.
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
KGC shares rose $0.03 (+0.46%) in premarket trading Friday. Year-to-date, KGC has gained 9.49%, versus a 6.58% rise in the benchmark S&P 500 index during the same period.
About the Author: Neha Panjwani
From her school days, Neha harbored a profound fascination for finance, a passion that steered her toward a career as an investment analyst following the completion of her bachelor's degree in commerce. Currently enrolled in the CFA program, Neha is dedicated to further enriching her comprehension of investment fundamentals. Neha's primary objective is to aid retail investors in discerning optimal investment opportunities by diligently evaluating crucial aspects of financial instruments, with a primary focus on stocks and ETFs. Her commitment lies in empowering individuals to make informed and strategic investment decisions in the dynamic world of finance.
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