IAMGOLD Corp (IAG) owns interests in mines worldwide. Though a member of the gold sector, the company explores for many metals, including copper, zinc, and silver, as well as diamonds. Holders of IAG’s shares benefit from a diversified portfolio of mining interests, which has given investors a reasonable, if at times volatile, return.
IAG shares are currently trading around $21.75, and the mean 12 month price target from analysts researching the stock is $26.94 (23% upside potential). This stock is trading above its 50-day exponential moving average of $20.24, and its 200-day exponential moving average of $19.90. The move above these averages, is medium term positive.
Earnings per share for the last 12 months are $2.20, though expected to fall to $1.58 in the next fiscal year (ending Dec 2012), as the economic slowdown takes its toll (ending Dec 2012). These numbers place the shares on a trailing price to earnings ratio of 9.93, and a forward multiple of 13.86. Barrick Gold (ABX) shares trade on a trailing price to earnings ratio of 13.47, and a forward multiple of 8.32. Competitor Newmont Mining (NEM) shares trade on a forward price to earnings multiple of 10.84, and trailing multiple of 15.20, whilst gold miner, Rangol Resources (GOLD) trades on a trailing price to earnings ratio of 50.81, and a forwar multiple of 15.22.
For investors looking at dividend paying stocks, IAG’s payment of a dividend of $0.10 last year gives the stock a yield of 0.50%, which is covered 22 times by its earnings. Payments from other competitors are higher though not so well covered: GOLD 0.20% and 12 times covered; NEM 1.90% and 3.5 times; ABX 1.00% and 7.5 times.
Current operating margin at IAG is 35.19%, with a return on assets of 9.28% and a return on equity of 15.06%. ABX’s operating margin of 45.07% is higher, and similar to NEM’s 43.06%, though GOLD’s lower margin of 35.21% is the same as IAG’s.
The current revenue from IAG’s income statement is $1.51 billion, and last quarter’s revenue showed year on year growth of 74.50%. IAG has cash of $1.08 billion, and no debt.
Looking at the 12-month chart, shareholders in IAG have had a better return than the S&P 500 Index over the past 12 months, and better than those of ABX. The share price has pushed through some technical resistance lately and look to be gearing up for a further rise in the near future. This could be further promoted by the rise in the price of gold, and silver, as the performance of mining shares catch up with the performance of the price of the precious metals this year.
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The company has been making some interesting announcements recently:
- The company announced yesterday that it is using some of its cash pile to acquire a strategic stake in Bellhaven Copper & Gold (BHV.V);
- On October11th, IAG said that its third quarter gold production had increased by 18.1% over the second quarter of 2011, and 13.8% up on the comparable quarter last year;
- The company sold its Mupane Gold Mine in Botswana at the end of August, in a deal that gave it cash and shares, allowing it to participate in further success at the mine whilst concentrating its efforts elsewhere.
Overall, the trading pattern of IAG shares, in addition to its strong and positive news flow, lead me to believe that the best is yet to come for shareholders. Its strong cash position and lack of debt will allow it the financial flexibility to profit from opportunities like the Bellhaven share purchase. Any anxiety over global sovereign debt will help the price of gold and silver, whilst an easing of these concerns would be likely to be positive for other more industrial metals like zinc and copper. IAG mines them all, therefore it's a buy for me.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
