Three Gold Mining Stocks Worth Digging Into
This week, we use AAII’s A+ Investor Stock Grades to provide insight into three gold mining stocks. With the recent rise in gold prices, should you consider the three gold mining stocks of Barrick Gold Corp. (ABX), Jaguar Mining Inc. (JAGGF) and Kinross Gold Corp. (KGC)?
Gold Recent News
As gold prices surge to unprecedented highs amid global economic uncertainties, investors are turning their attention to the gold mining sector. With recent economic uncertainty and inflationary pressures, gold has once again asserted its status as a safe-haven asset, drawing interest from investors seeking stability in their portfolios.
Moreover, geopolitical unrest continues to fuel the appeal of gold as investors seek refuge from market volatility. Gold’s reputation as a hedge against geopolitical risks has only strengthened its allure, driving demand and pushing prices to new record highs.
As gold prices continue to soar, gold mining companies stand to benefit from increased revenues and profitability. Higher gold prices not only enhance the value of their existing reserves but also incentivize further exploration and development of new mining projects. Additionally, the surge in gold prices may lead to heightened investor interest in gold mining stocks, providing these companies with access to capital for expansion and investment in technology and infrastructure.
With the stage set for gold to shine, exploring investment opportunities in the gold mining sector becomes imperative. Companies such as Barrick Gold, Jaguar Mining and Kinross Gold emerge as noteworthy contenders worth examining further.
Grading Gold Mining Stocks With AAII’s A+ Stock Grades
When analyzing a company, it is helpful to have an objective framework that allows you to compare companies in the same way. This is why AAII created the A+ Stock Grades, which evaluate companies across five factors that research and real-world investment results indicate to identify market-beating stocks in the long run: value, growth, momentum, earnings estimate revisions (and surprises) and quality.
Using AAII’s A+ Stock Grades, the following table summarizes the attractiveness of three gold mining stocks — Barrick Gold, Jaguar Mining and Kinross Gold — based on their fundamentals.
AAII’s A+ Stock Grade Summary for Three Gold Mining Stocks
What the A+ Stock Grades Reveal
Barrick Gold Corp. (ABX) is a major Canadian producer of gold and copper. The company is primarily involved in the production and sale of these metals, along with exploration and mine development. Barrick Gold owns interests in gold mines located across various countries, including Argentina, Canada, Cote d’Ivoire, the Democratic Republic of the Congo, the Dominican Republic, Mali, Tanzania and the U.S. Its operations encompass a range of mines such as the Nevada, Bulyanhulu, Hemlo, Jabal Sayid, Kibali, Loulo-Gounkoto, Lumwana, North Mara, Porgera, Pueblo Viejo, Tongon, Veladero and Zaldivar mines. The Bulyanhulu mine is located in northwest Tanzania, while the Hemlo mine operates underground near Lake Superior in Ontario, Canada.
The company has a Value Grade of B, based on its Value Score of 74, which is good value. Higher scores indicate a more attractive stock for value investors and, thus, a better grade. The Value Grade is the percentile rank of the average of the percentile ranks of the price-to-sales (P/S) ratio, price-earnings (P/E) ratio, price-to-book-value (P/B) ratio, price-to-free-cash-flow (P/FCF) ratio, shareholder yield and the ratio of enterprise value to earnings before interest, taxes, depreciation and amortization (EBITDA).
Barrick Gold has a rank of 26 for shareholder yield and 22 for the enterprise-value-to-EBITDA ratio. The company has a shareholder yield of 3.0% and an enterprise-value-to-EBITDA ratio of 6.1. The price-to-book ratio is 0.98, which translates to a rank of 28.
A higher-quality stock possesses traits associated with upside potential and reduced downside risk. Backtesting of the Quality Grade shows that stocks with higher grades, on average, outperformed stocks with lower grades from 1998 through 2019.
The A+ Quality Grade is the percentile rank of the average of the percentile ranks of return on assets (ROA), return on invested capital (ROIC), gross profit to assets, buyback yield, change in total liabilities to assets, accruals to assets, Z double prime bankruptcy risk (Z) score and F-Score. The score is variable, meaning it can consider all eight measures or, should any of the eight measures not be valid, the valid remaining measures. To be assigned a Quality Score, though, stocks must have a valid (non-null) measure and corresponding ranking for at least four of the eight quality measures.
Barrick Gold has a Quality Grade of B, with a score of 67, which is strong. The company ranks strongly in terms of its return on assets and F-Score. The company has a return on assets of 3.2% and an F-Score of 7. The F-Score is a number between 0 and 9 that assesses the strength of a company’s financial position. It considers the profitability, leverage, liquidity and operating efficiency of a company.
Barrick Gold has a Momentum Grade of B, based on its Momentum Score of 65, which is strong. This means that the stock’s momentum is strong in terms of its weighted relative price strength over the last four quarters. The weighted four-quarter relative strength rank is the relative price change for each of the past four quarters, with the most recent quarterly price change given a weight of 40% and each of the three previous quarters given a weight of 20%. The ranks are 85, 26, 60 and 32, sequentially from the most recent quarter.
Jaguar Mining Inc. (JAGGF) is a Canadian company focused on gold mining, development and exploration in Brazil. Its operations are centered in the Iron Quadrangle region of Minas Gerais state. The company owns three gold mining complexes and has significant exploration potential across a 65,000-hectare land package. Its primary assets include the Turmalina gold mine complex, Caete gold mine complex (the Pilar and Roca Grande mines and the Caete plant) and Paciencia gold mine complex. These assets are operated by its subsidiary, Mineracao Serras do Oeste Ltda. (MSOL). Additionally, Jaguar Mining owns the Pitangui project and the Acurui project.
Earnings estimate revisions indicate how analysts view a firm’s short-term prospects. Jaguar Mining has an Earnings Estimate Revisions Grade of B, based on a score of 76, which is positive. The grade is based on the statistical significance of its latest two quarterly earnings surprises and the percentage change in its consensus estimate for the current fiscal year over the past month and past three months.
Jaguar Mining reported a negative earnings surprise of 27.3% for the first quarter of 2024, and in the prior quarter reported a positive earnings surprise of 460.0%. Over the last month, the consensus earnings estimate for the second quarter of 2024 has increased from $0.05 to $0.06 per share due to one upward and no downward revisions. Over the last month, the consensus earnings estimate for full-year 2024 has increased from $0.21 to $0.26 per share, based on one upward revision.
The components of the Growth Composite Score consider a company’s success in growing sales on a year-over-year and long-term annualized basis and its ability to consistently generate positive cash from its core operations. Jaguar Mining has a Growth Grade of B, with a score of 70, which is strong. The company has a five-year annual sales growth rate of 7.5% and has seen sales increase year over year for two of the last five years. Cash from operations has been positive in the past five consecutive years.
Jaguar Mining has a Momentum Grade of A, based on its Momentum Score of 93, which is very strong. Its weighted relative strength ranks over the last four quarters are 97, 26, 79 and 12, sequentially from the most recent quarter. The weighted four-quarter relative price strength is 22.2%.
The company has a Value Grade of A, based on its Value Score of 82, which is deep value.
Jaguar Mining’s price-to-book ratio is 0.69, which ranks in the 15th percentile among all U.S.-listed stocks. Additionally, Jaguar Mining’s enterprise-value-to-EBITDA ratio is 4.2, which ranks in the 11th percentile and compares to the sector median of 9.2. These favorable ratios suggest that Jaguar Mining’s stock may be relatively cheap compared to similar companies in its sector.
Kinross Gold Corp. (KGC) is a prominent global senior gold mining company headquartered in Canada. Its operations and projects span across the U.S., Brazil, Mauritania, Chile and Canada. Key projects include Fort Knox, Round Mountain, Bald Mountain, Manh Choh, Paracatu, La Coipa, Lobo-Marte, Tasiast and Great Bear. These projects encompass a range of mining operations, from open-pit mines like Fort Knox and Round Mountain to long-life cornerstone operations like Paracatu.
Kinross Gold has a Quality Grade of B, with a score of 65, which is strong. The company’s return on assets is 4.1%, for a rank of 73. Its F-Score is 7, for a rank of 85.
Kinross Gold has a Momentum Grade of A, based on its Momentum Score of 92, which is very strong. Its weighted relative price strength ranks over the last four quarters are 95, 28, 84 and 38, sequentially from the most recent quarter. The weighted four-quarter relative price strength is 19.6%.
Kinross Gold has an Earnings Estimate Revisions Grade of B, based on a score of 62, which is positive. The company reported a positive earnings surprise of 61.3% for the first quarter of 2024, and in the prior quarter reported a positive earnings surprise of 15.8%. Over the last month, the consensus earnings estimate for the second quarter of 2024 has increased from $0.076 to $0.093 per share due to three upward revisions and one downward revision. Over the last month, the consensus earnings estimate for full-year 2024 has increased from $0.394 to $0.475 per share, reflecting 11 upward and two downward revisions.
Kinross Gold has a Value Grade of C, with a score of 56, which is average. It ranks in the 12th percentile in terms of its enterprise-value-to-EBITDA ratio and the 36th percentile in terms of its shareholder yield.
The company’s Growth Grade is B, based on a score of 79, which is strong. Kinross Gold has generated positive annual cash from operations in the past five fiscal years and has a five-year annual sales growth rate of 5.7%.
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The stocks meeting the criteria of the approach do not represent a “recommended” or “buy” list. It is important to perform due diligence.
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