"That is gold which is worth gold." - George Herbert
Gold miners have been an underperforming sector in 2012. Despite a steady gold price, miners have lost 20% compared to the price of gold over the last year (See chart) mainly due to inflation in mining costs and some major strikes. One large gold miner, Newmont Mining (NEM), has picked up some recent positive comments from analysts. Its shares are cheap and the stock looks poised for a much better year in 2013.
Key recent catalysts for Newmont Mining:
- BMO Capital Markets just reiterated its Outperform rating and $67.50 a share price target on the shares, around 50% above the current stock price.
- Barclays also initiated the shares as a "Buy" six weeks ago.
- After being slightly down in FY2012, revenues are expected to increase in the low double digit range for FY2013. Consensus earnings estimates for FY2013 have risen 2% over the last three months.
- The stock looks like it has technical support at this level (See Chart)
Newmont Mining Corporation produces gold and copper from its assets located in the United States, Australia, Peru, Indonesia, Ghana, New Zealand, and Mexico.
4 additional reasons NEM is solid value play at just over $45 a share:
- The median price target held by the 18 analysts that cover the stock is $68 a share.
- NEM yields 3% and has more than tripled its dividend payouts over the past five years.
- The stock is selling near the bottom of its five year valuation range based on P/E, P/S, P/CF and P/B.
- NEM is priced at just 9x forward earnings, a discount to its five year average (15.7)