Seeking Alpha
Profile| Send Message|
( followers)

By Darnell Brown

Gold is currently priced near record highs and is priced above $1,890 per ounce. The SPDR Gold Shares Trust fund (NYSEARCA:GLD) which strives to replicate the cost of gold bullion, is currently trading at all time highs, and is up 50% over the last 52 weeks. This article will examine the stocks of six gold companies to determine if they have the potential to be stock market winners at a time where gold is hovering close to $2000 per Troy ounce.

Agnico-Eagle Mines Limited (NYSE:AEM)

Agnico-Eagle Mines has a market cap of $11.09 billion, with a price to earnings ratio of $35.03. The stock has traded in a 52 week range between $54.19 and $88.20. The current stock price is $65.57. On July 29th the company reported second quarter revenues of $420 mil with net income of $66.4 million [see transcript]. Those numbers compared favorably to the second quarter of 2010 revenues, which were $369 million with net income of $107 million. The company reported net income of $330 million for 2010 compared to $90.7 million for 2009.

One of Agnico-Eagle Mine’s main competitors is Kinross Gold Corporation (NYSE:KGC). Kinross Gold is trading at $16.79 with a price to earnings ratio of 18.00, and a market cap of $19.07 billion. Kinross Gold’s earnings per share increased by 25% last quarter compared to Agnico-Eagle’s whose earnings per share increased by 9%.

Agnico-Eagle Mines has increased net income in each of the last 3 years. Over the last three years, the stock price has increased by 18% from $55.34 to its current $65.57. Agnico-Eagle Mines has not performed poorly, but it has not kept pace with its competitors. In the last quarter Agnico-Eagle’s earnings per share growth was lower than average for the gold mining industry. That is concerning because the stock’s price to earnings ratio of 35.03 is much higher than the industry average of 20.90. I think that this stock is overpriced. I rate Agnico-Eagle Mines Limited as a hold.

Newmont Mining Corporation (NYSE:NEM)

Newmont Mining has a market cap of $29.69 billion, with a price to earnings ratio of 13.41. The stock has been trading in a 52 week range between $50.05 and $65.50. The current stock price is $60.08. On July 29th the company reported second quarter revenues of $2.38 billion with net income of $387 million [see transcript]. This compares to the second quarter of 2010 when the company reported revenues of $2.15 billion and net income of $384 million. Year over Year the company reported 2010 net income of $2.27 billion up from $1.31 billion in 2009.

One of Newmont Mining’s largest competitors is Barrick Gold Corporation (NYSE:ABX). Barrick Gold trades at $51.92 and has a price to earnings ratio of 13.54. In the last quarter, Barrick Gold’s earnings per share were up 42%, compared to Newmont Mining whose earnings per share increased by 17%. Over the past 52 weeks, the stock of Barrick Gold has increased by 15.12%, versus Newmont Mining whose stock price has increased by 4.34%.

Newmont Mining increased it annual net income by 73% from 2009 through 2010. The company will probably not be able to repeat its 2010 performance, but it is on track to increase earnings by over 20% this year. The price of gold is currently priced at over $1890.00 per ounce and should remain high for as long as investors are fearful about being in the general stock market. I believe that with a price to earnings ratio of 13.41, Newmont Mining is relatively cheap. I also believe that the company will benefit from gold’s record high prices. I rate Newmont Mining as a buy.

Randgold Resources Limited (NASDAQ:GOLD)

Randgold Resources has gold operations in West and Central Africa.

Randgold Resources has a market cap of $3.86 billion, with a price to earnings ratio of 49.75. The stock has traded in a 52 week range between $70.18 and $110.07. The stock has just exceeded its 52 week high and is trading at $112.13. The company reported second quarter revenues of $321 million compared to $104 million in 2010 [see transcript]. The second quarter net income was $103 million compared to net income of 36.4 million in the second quarter of 2010.

One of Randgold Resources' closest competitors is Iamgold (NYSE:IAG). Iamgold is trading at $20.50 and has a market cap of 7.74 billion with a price to earnings ratio of 9.36. The company’s stock price has increased by 7.68% over the last 52 weeks.

Randgold Resources is one of Hedge Fund Manager John Paulson’s favorites. Over the last year, the stock price of Randgold Resources has increased by 24%. This company has shown tremendous earnings growth. Second quarter net income increased by 182% when compared to the second quarter of 2010. Year 2010 earnings increased by 49% from 2009. Investors seem to like this company’s strong earnings growth. The stock is also benefitting because gold has always been a safe haven when the stock market is bearish. I am in agreement with John Paulson. I think this stock will continue to increase in value. I rate Randgold Resources Limited as a buy.

Royal Gold Inc. (NASDAQ:RGLD)

Royal Gold Inc. has a market cap of $3.86 billion with a price to earnings ratio of 54.26. The stock has traded in a 52 week range between $45.37 and $70.86. The stock has just surpassed its 52 week high and is trading at $73.56. Royal Gold Inc. reported second quarter revenues of $56 million compared to the second quarter 2010 revenues of $47.8 million [see transcript]. Second quarter net income was $20.6 million compared to 11.7 million in the second quarter of 2010.

Royal Gold Inc. has done a terrific job of increasing revenues and net income. Last quarter the company increased earnings per share by 86%. The company’s stock price has also done well, and is up by 43.8% over the last 52 weeks. I believe that this company will continue to benefit from the high cost of gold. I think that the stock price will continue to rise, and I rate Royal Gold as a buy.

Yamana Gold Inc. (NYSE:AUY)

Yamana Gold Inc. has a market cap of $11.56 billion with a price to earnings ratio of 19.46. The stock has traded in a 52 week range between $9.78 and $15.90. This stock has just surpassed its 52 week high and is trading at $15.97. The company reported second quarter revenues of $553 million compared to revenues of $373 million in the second quarter of 2010. The second quarter net income was $188 million compared to the second quarter of 2010 net income of $96.5 million. Year 2010 net income increased to $449 million from $202 million in 2009.

Yamana Gold Inc has provided its investors with tremendous revenue and income growth. Second quarter earnings were up by 94.8% when compared to the second quarter of 2010. Year 2010 earnings increased by 122% from 2009. The stock is currently trading at a new 52 week high and was up by more than 5% last week. The stock is not rising on specific company news, but rather on the overall strength of the gold market. If the stock market continues to sputter, investors will flock to gold stocks and the price of this stock should continue to increase. I rate Yamana Gold Inc. as a buy.

Goldcorp Inc. (NYSE:GG)

Goldcorp has operations around the U.S, Canada, and Central and South America.

Goldcorp Inc. has a market cap of $41.71 billion, with a price to earnings ratio of 21.02. The stock has traded in a 52 week range of $39.04 and $56.20. The stock is currently trading at $54.28. The company reported second quarter revenues of $1.28 billion compared to revenues of $897 million in the second quarter of 2010. The second quarter net income was $870 million compared to the second quarter of 2010 net income of $472 million.

One of Goldcorp’s close competitors is Anglo Gold Ashanti LTD. (NYSE:AU). Anglo Gold Ashanti trades at $46.60 and has a market cap of $17.97 billion with a price to earnings ratio of 22.57. Over the last 52 weeks, the stock price has increased by 4.54% compared to Goldcorp Inc. whose stock price has increased by 23.30%.

Goldcorp Inc has done well as a result of investors turning to gold as a safe haven. Second quarter revenues increased by 42% while second quarter net income increased by 84%. The stock price like many other gold stocks is near its 52 week high. This company’s earnings have been doing well and so has the stock price. If the price of gold remains high, this stock should increase in value. I rate Goldcorp Inc. as a buy.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.