Kinross Gold (KGC) has fallen on tough times as the price for gold has more or less stabilized. However, investors may be getting over pessimistic on the stock, especially considering the fact that KGC is now trading at its lowest level since 2005 when gold prices were less than half as much. That suggests a bit of a discrepancy in the two financial instruments. The valuation metrics are all in agreement that the stock is undervalued and an in depth look is provided below.
Valuation: Kinross Gold's trailing 5 year valuation metrics suggest that the stock is undervalued as all of the metrics are below their respective 5 year averages. Kinross Gold's current P/B ratio is 0.7 and it has averaged 1.9 over the past 5 years with a high of 3 and low of 1. Kinross Gold's current P/S ratio is 2.2 and it has averaged 6.8 over the past 5 years with a high of 12.2 and low of 3.3. Kinross Gold's current P/E ratio is 10 and it has averaged 28.2 over the past 5 years with a high of 46.3 and low of 14.8.
Price Target: The consensus price target for the analysts who follow Kinross Gold is $14. That is upside of 78% from today's stock price of $7.89 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: Kinross Gold is currently trading at about $8 a share with analysts expecting EPS of $1.18 next year, an earnings increase of 26% y/y, for a forward P/E ratio of 6.7. Taking a look at the company's publicly traded comparisons will give us a better idea of the stock's relative valuation. Compania de Minas Buenaventura (BVN) is currently trading at about $39 a share with analysts expecting EPS of $4.06 next year, an earnings increase of 4% y/y, for a forward P/E ratio of 9.5. Eldorado Gold (EGO) is currently trading at about $12 a share with analysts expecting EPS of $0.86 next year, an earnings increase of 25% y/y, for a forward P/E ratio of 13.7. Randgold Resources (GOLD) is currently trading at about $78 a share with analysts expecting EPS of $7.03 next year, an earnings increase of 11% y/y, for a forward P/E ratio of 11. The mean forward P/E of Kinross Gold's competitors is 11.4 which suggests that Kinross Gold is undervalued relative to its publicly traded competitors.
Earnings Estimates: Kinross Gold has beat EPS estimates 2 times in the past 4 quarters. The company's EPS figures have come in between -4 cents and 3 cents from consensus estimates or about -19% to 17.6% from analyst estimates. The company has reported earnings that have differed from analyst estimates by a wide margin which suggests that the stock may experience upside from earnings surprises.
Price Action: Kinross Gold is down 45% over the past year, underperforming the S&P 500, which is up 3.3%. Looking at the technicals, the stock is currently below its 50 day moving average, which sits at $9.56 and below its 200 day moving average, which sits at $12.77.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.