Assuming that analysts’ target prices on gold mining stocks are not based on valuation heuristics, I then derive a value of cost of equity capital for both gold mining stocks.
I compare the cost of equity capital derived from analysts’ mean target prices with the one I estimate considering the exposure of gold stocks to changes in gold price.
For the nearly unanimous majority of analysts GG and NEM are a buy.
I question if analysts’ reports refer to any variation of discounted cash flow model as a basis for the price targets.
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Newmont Mining Corp (NYSE:NEM) stock is currently trading 44.01% below its 52-week-high, 1.49% above its 52-week-low. The 1-year stock price history is in the range of $15.39 – $27.9. Newmont Mining Corp (NEM) has a price to earnings ratio of 16.2 versus Basic Materials sector average of 17.48. NEM stock price has underperformed the S&P 500 by 13.1%. The Gold Mining company is currently valued at $8.26 billion and its share price closed the last trading session at $15.62. The stock has a 50-day moving average of $17.02 and a 200-day moving average of $22.4.
Newmont Mining Corp (NEM) current short interest stands at 11.14 million shares. It has decreased by 16% from the same period of last month. Around 3% of the company’s shares, which are float, are short sold. With a 10-days average volume of 7.45 million shares, the number of days required to cover the short positions stand at 1.5 days.
The company is expected to announce next quarter earnings on October 29, at consensus estimate of $0.18. Newmont Mining Corp (NEM) reported last quarter earnings on July 22. The Gold Mining company announced earnings per share of $0.26 against a consensus Street estimate of $0.25, beating the average estimate by $0.01. This corresponds to an increase of $0.05 compared to the same quarter of the previous fiscal year.
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There are currently twenty-three analysts that cover Newmont Mining Corp stock. Of those twenty-three, ten have a Buy rating, thirteen have a Hold rating. On a consensus basis this yields to an Overweight rating. The consensus target price stands at $24.4.
A recent analyst activity consisted of Scotia Howard Weil upgrading their rating to Outperform on August 31. On the date of report, the stock closed at $17.04.
BMO Capital initiated their coverage on the stock with Outperform rating on August 13, and fixed their price target at $23.5. This corresponds to a 50.45% upside from the last closing price. On the date of report, the stock closed at $17.46.
Another research firm was Deutsche Bank who upgraded their Hold rating to Buy on August 13. Deutsche Bank fixed their price target at $27. This translates to a 72.86% upside from the last closing price. On the date of report, the stock closed at $17.46.
Newmont Mining Corporation acquires, explores, and develops mineral properties. The Company produces gold from operations in the United States, Australia, Peru, Indonesia, Ghana, Canada, New Zealand and Mexico. Newmont also mines and processes copper in Indonesia.