5 Great Stocks For True Gold Bugs

Includes: ABX, AEM, KGC, NEM, UXG
by: Stock Croc

For much of the past year, gold has been one of the best investments. During that time frame, gold has traded between $1,317.40 and $1,923.70 per ounce. While that range comprises a 46% increase, gold has increased 26.72% over the past twelve months. Compare that to the S&P 500 which has increased a relatively measly 2.86% over those same twelve months. Below, we look at five gold stocks to determine whether the shiny metal will continue its winning ways. Please consider this analysis as a starting point for your own research.

Barrick Gold Corporation (NYSE:ABX): Shares recently traded around $49, about the middle of its 52-week trading range of $42.50 to $55.95. At this price, Barrick has a market capitalization of is $49.32 billion. Earnings per share for the past twelve months are $4.17. The current dividend of $0.49 per share yields 1%.

The main driver in the price of Barrick’s shares is the price of gold. Since gold has historically been considered a safe haven in times of economic turmoil, it’s not too surprising that gold has had such a stellar year. Barrick’s has experienced a nice 29.7% rate of revenue growth over the past year. Again, this can be directly linked to gold’s performance. The company does maintain very nice margins, with a gross margin of 60.11% and an operating margin of 46.20%. That performance is almost double that of competitor AngloGold Ashanti Ltd. (NYSE:AU) who has grown revenues by 11.0% and has margins of 36.40% and 24.01% (gross vs. operating). If you want to play in the gold space, Barrick is a good choice.

Agnico-Eagle Mines, Ltd. (NYSE:AEM): Shares were recently trading around $43, near the low end of its 52-week trading range of $42.21 to $88.20. The recent price equates to a market capitalization of $7.34 billion for the company. AEM has earned $0.70 per share for the past twelve months and pays a dividend of $0.64 per share for a yield of 1.50%.

Agnico has achieved solid margins over the past year. Its gross margin has come in at 53.22%, and the operating margin is 29.95%. Those margins are not as impressive as those of Barrick, as discussed above. Agnico’s revenue growth also lags that of Barrick, with a year over year quarterly revenue growth rate of 30.60% vs. Barrick’s comparable rate of 44.40%. Although Agnico provides a better dividend yield than Barrick, for the time being, hold off on any new investments in Agnico.

Kinross Gold Corporation (NYSE:KGC): Shares recently traded near $14, close to the bottom of their 52-week trading range of $12.80 to $19.80. Kinross’ market capitalization is $16.31 billion based on this price. Earnings per share for the past year are $0.93, and the company pays a dividend of $0.12 per share, yielding 0.80%.

Kinross has been growing revenue at a similar rate to that of competitors Barrick and Goldcorp Inc. (NYSE:GG). Kinross grew revenue at 41.80%, Barrick grew at 44.40%, and Goldcorp grew at 47.80%. Not surprising, though, is that Kinross also has a comparable gross margin of 59.39%. Barrick’s gross margin was 62.04% and Goldcorp’s was 63.12%. What is surprising is that Kinross has a much lower operating margin than both—31.39% vs. 46.69% and 42.53% for Barrick and Goldcorp, respectively. Considering Kinross also yields a lower dividend than Barrick and is line with that of Goldcorp, this stock should be considered a hold at best.

Newmont Mining Corporation (NYSE:NEM): Shares recently traded around $67, at the higher end of its 52-week trading range of $50.05 to $71.25. The company’s market capitalization is $33.03 billion at this price. Over the past year, the company has reported earnings per share of $4.48, and pays a dividend of $1.20 per share to yield 1.80%.

Newmont Mining has margins in line with those of Barrick and Goldcorp. Newmont’s gross margin is 62.47% and its operating margin is 41.84%. Barrick’s are 62.04% and 46.69% and Goldcorp’s are 63.12% and 42.53%. Newmont’s growth rate is substantially lower, though. It’s year over year quarterly revenue growth rate is a minuscule 5.70%. The company’s yield of 1.80% is higher than that of either Barrick or Goldcorp. While the dividend adds to the interest of this stock, the minimal growth rate should be a concern. Investors should wait to see if the company can improve their growth rate before investing additional capital.

U.S. Gold Corporation (NYSE:UXG): Shares were recently trading at less than $5.00, which is near the low end of their 52-week trading range of $3.24 to $9.87. This share price gives the company a market capitalization of $637.08 million. U.S. Gold has reported a loss of $0.29 per share over the past year. The company does not currently pay a dividend.

Since U.S. Gold reported no revenue, there are no gross or operating margins to compare with those of its competitors. As such, we’ll have to look at some other figures to try to determine if it is worth your investment dollars. The company reported that it had $11.4 million in cash and short-term investments at December 31, 2010. That works out to a little bit more than $0.08 for each of the 139.71 million shares outstanding. U.S. Gold also has negative cumulative retained earnings of $331.4 million. Considering the strength of its competitors such as Barrick and Goldcorp, there is no reason to chase such a speculative stock.

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