Barrick Gold (ABX) hit a multi-year low on Friday during the market selloff. It is now down some twenty five percent in the last two months. This premier gold miner is now deeply discounted compared to its earning power. For long term investors, I believe this will turn out to be a solid entry point.
Barrick Gold - "Barrick Gold Corporation engages in the production and sale of gold and copper. The company has a portfolio of 26 operating mines, and exploration and development projects located in North America, South America, the Australia Pacific region, and Africa". (Business Description from Yahoo Finance)
7 reasons Barrick will reward value investors at under $38 a share:
- The company went to over $5B in operating cash flow from a negative operating cash of more than $2B in FY2009.
- ABX is over 50% below consensus analysts' price targets. The 21 analysts that cover the stock have a median price target of $59 a share on Barrick. S&P has its highest rating "Strong Buy" and a $77 a share on ABX.
- It has an A- rated balance sheet, a low beta (.45) and pays a dividend yield of 1.6%.
- It has a forward PE of under 6 ½ times FY2013's earnings and an extremely low five year projected PEG of .22.
- It has higher operating margins and a lower PE than some major competitors like AngloGold Ashanti (AU) and Newmont Mining (NEM).
- Only 9% of the company's production comes from volatile Africa, 80% comes from North and South America.
- Revenues have grown at a compounded average rate of over 24% in the last decade and the company is executing against a plan that will take it to annual production of 9mm ounces annually by 2015.