Newmont Mining Looks Better Positioned Than Its Peers

| About: Newmont Mining (NEM)

Summary

Considering the last twelve months period, only NEM (+0.05%) and AEM (+23.16%) did much better than their peers. Downside for the S&P 500 index (-6.96%).

GG (together with EGO) seems to have a better debt situation than the other companies.

GG, NEM and ABX seem to struggle more than the others in paying interest expenses on outstanding debt.

After having considered several ratios, NEM seems to be promising and better positioned than its peers.

In the past 5 years Gold mining stocks lost a lot in terms of share price -- ranging from -57.42% of Agnico Eagles Mine Ltd. (NYSE:AEM) to -88.57% of Kinross Gold Corporation (NYSE:KGC).

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Inside the interval there are (NYSE:SLW) with -62.21%, (NYSE:EGO) -80.90%, (NYSE:ABX) -82.18%, (NYSE:AUY) -82.29%, (NYSE:NEM) -66.84% and (NYSE:GG) -70.32%. At the same time the S&P 500 (NYSEARCA:SPY) has grown 52.82%.

Considering the last twelve months period, only NEM (+0.05%) and AEM (+23.16%) did much better than their peers and S&P 500 (-6.96%).

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Table 1 (most recent annual) and Table 2 (most recent quarter) show the financial and debt situation of the gold stocks.

Table 1.: financial ratios, most recent annual

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If you look at Long-Term debt to equity and total debt to equity ratios (most recent annual), GG and EGO seem to have a better debt situation than the other companies.

Table 2.: financial ratios, most recent quarter

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If you look at Long-Term debt to equity ((mrq)) and total debt to equity ((mrq)) ratios, GG, SLW and EGO have a better debt situation than the other companies.

Table 3 shows interest coverage (NYSE:TTM) for the gold stocks. The Interest Coverage Ratio is used to determine how easily a company can pay interest on outstanding debt.

A ratio below 1 means that the company is having problems generating enough cash flow to pay its interest expenses. Ideally you want the ratio to be over 1.5.

Table 3.: Interest Coverage

The interest coverage ratio ranges from 1.77 (NYSE:NEM) to 119.08 (NYSE:SLW).

GG together with EGO seems to have a better debt situation than the other companies.

Instead when you look at the interest coverage NEM, GG and ABX seem to have more difficulty than the others in paying interest expenses on outstanding debt.

Business performance of gold mining companies is dependent on the prices of the precious metals they mine, so it only makes sense to consider an investment in them when they're priced significantly below their intrinsic values.

Many investors use a handy approach to find undervalued companies: The Price-To-Book Ratio. Table 4 shows the price-to-book ratios for the gold stocks and the return on avg company's equity.

Table 4.: Price-to-Book ratio and Return on avg equity operating metric

Four gold stocks (GG, AUY, ABX and KGC) have a negative return on avg equity. Large discrepancies between P/B and ROE, a key growth indicator, can sometimes send up a red flag on companies (here).

Profitability and free cash flow

Companies' trailing 12-months and most recent quarter metrics are shown by table 5 (most recent quarter) and table 6 (most recent annual).

Table 5.: EPS, Operating margin, Net Income and Ebitda (most recent quarter)

The operating margin ranges from -65.18 (SLW) to 23.78 (NYSE:EGO); the net income ranges from - 252.00 (ABX) to 286.00 ; the earnings per share (NYSEARCA:EPS) ranges from -2.90 (GG) to 0.93 . With reference to EBITDA (company's earnings before interest, taxes, depreciation and amortization), ABX shows the best number followed by NEM.

Table 6.: EPS, Operating margin, Net Income and Ebitda (most recent annual)

The operating margin ranges from -73.54 (NYSE:GG) to 32.71 ; the net income ranges from -2,959.00 (NYSE:ABX) to 373.00 ; With reference to EBITDA (company's earnings before interest, taxes, depreciation and amortization), ABX shows the best number followed by NEM.

Another way to assess the value of a company that is comparable to the P/E ratio, is the Free Cash Flow Yield: it is an indicator that offers investors a better measure of a company's fundamental performance than the widely used P/E ratio.

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Among the gold stocks considered in this article, NEM is positioned to perform well.

Conclusion

If we look at the first chart of this article it shows that gold mining stocks have lost a lot in terms of share price during the last 5 years and that the stock market has instead grown more than 88% during the same period of time. Considering the last twelve months period only NEM and AEM did much better than their peers while S&P 500 index decreased with -6.96%.

GG together with EGO seems to have a better debt situation than the other companies. Instead when you look at the interest coverage , GG, NEM and ABX seem to struggle more than the others in paying interest expenses on outstanding debt.

Various financial ratios can be used to build up a model to screen for gold mining stocks that perform well: EPS, Operating margin, Net Income and Ebitda are useful indicators for the goal. When you consider various ratios for your purposes, a stock can be well positioned with reference to a particular ratio and the music changes completely when a different ratio is considered.

Another indicator that offers investors a better measure of a company's fundamental performance than the widely used P/E ratio is the Free Cash Flow Yield. NEM is the best gold stock positioned to perform well when I consider this ratio.

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

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.