As gold prices have slumped over the past six months, so has the price for Yamana Gold's (NYSE:AUY) stock. The stock is down for 2012 compared to gains in the broader market. Now as the stock is profitable, it is possible to value the stock on an earnings basis. To that end, it seems like the stock is fairly valued. Only analysts suggest that the stock is undervalued. Looking back on the stock's performance over the past 5 years versus the gold ETF GLD, I am not very impressed. Although the stock did outperform the S&P 500 by a bit, simply an investment in the gold ETF would have done better. Based on that and the stock's valuations, it seems like analysts are overly bullish on AUY and there are other better investments for your portfolio. Below is an in depth look at the valuation metrics and stock chart.
Valuation: Yamana Gold's trailing 5 year valuation metrics suggest that the stock is fairly valued as there is a mixed message about the valuation metrics compared to their 5 year averages. Yamana Gold's current P/B ratio is 1.5 and it has averaged 1.3 over the past 5 years with a high of 2.2 and low of 0.9. Yamana Gold's current P/S ratio is 5 and it has averaged 6.7 over the past 5 years with a high of 11.6 and low of 4.3. Yamana Gold's current P/E ratio is 19.3 and it has averaged 28.4 over the past 5 years with a high of 58.5 and low of 12.7.
Price Target: The consensus price target for the analysts who follow Yamana Gold is $21. That is upside of 45% from today's stock price of $14.29 and suggests that the stock is undervalued at these levels. This also suggests that the stock has significant upside and is an attractive opportunity at these levels.
Forward Valuation: Yamana Gold is currently trading at about $14 a share with analysts expecting EPS of $1.54 next year, an earnings increase of 31% y/y, for a forward P/E ratio of 9.3. Taking a look at the company's publicly traded comparisons will give us a better idea of the stock's relative valuation. AngloGold Ashanti (NYSE:AU) is currently trading at about $33 a share with analysts expecting EPS of $4.44 next year, an earnings increase of 22% y/y, for a forward P/E ratio of 7.5. Kinross Gold (NYSE:KGC) is currently trading at about $9 a share with analysts expecting EPS of $1.18 next year, an earnings increase of 24% y/y, for a forward P/E ratio of 7.8. Goldcorp (NYSE:GG) is currently trading at about $41 a share with analysts expecting EPS of $3.38 next year, an earnings increase of 37% y/y, for a forward P/E ratio of 12.2. The mean forward P/E of Yamana Gold's competitors is 9.2 which suggests that Yamana Gold is fairly valued relative to its publicly traded competitors.
Earnings Estimates: Yamana Gold has beat EPS estimates 3 times in the past 4 quarters. The company's EPS figures have come in between -1 cents and 1 cents from consensus estimates or about -4.5% to 4.2% from analyst estimates. The company's earnings come been relatively close to consensus estimates which suggests that analysts are good at projecting the company's results and share upside from earnings surprises will be limited.
Price Action: Yamana Gold is up 16% over the past year, outperforming the S&P 500, which is up 7.1%. Looking at the technicals, the stock is currently below its 50 day moving average, which sits at $16.03 and below its 200 day moving average, which sits at $15.30.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.