With numerous gold stocks taking a fall over the past year, there are a number of attractive options out there for investment opportunities. Iamgold (NYSE:IAG) stands out as its growth and undervaluation is on the high end of the spectrum.
IAG is a leading mid-tier gold mining company producing approximately one million ounces annually from five gold mines (including current joint ventures) on three continents. In the Canadian province of Quebec, the Company also operates Niobec, which produces more than 4.5 million kilograms of niobium annually, and owns a rare earth element resource close to its niobium mine. Iamgold is uniquely positioned with a strong financial position and extensive management and operational expertise. To grow from this strong base, Iamgold has a pipeline of development and exploration projects and continues to assess accretive acquisition opportunities. IAG's growth plans are strategically focused in certain regions in Canada, select countries in South America and Africa.
The company has been busy as of late and recently announced an acquisition. The company and Trelawney Mining and Exploration entered into a definitive agreement whereby IAG will acquire all of the issued and outstanding common shares of Trelawney. Trelawney is a Canadian junior mining and exploration company, focused on the development of the Cote Lake Deposit located adjacent to the Swayze Greenstone Belt in northern Ontario.
Trelawney's main asset is the advanced exploration Cote Lake Project, located in Ontario, Canada. On February 24, 2012, Trelawney announced an updated mineral resource estimate for Cote Lake, comprising 35 million tons at 0.82 g/t gold for 0.93 million ounces of indicated resources and 204 million tons at 0.91 g/t gold for 5.94 million ounces of inferred resources. Mineralization at Cote Lake has been intersected over a strike length of 1,200 meters, a horizontal width of 100 - 300 meters and a depth extent of more than 500 meters.
Below is an in depth look at the valuation metrics and stock chart.
Valuation: Iamgold's trailing 5 year valuation metrics suggest that the stock is undervalued as all of the metrics are below their respective 5 year averages. Iamgold's current P/B ratio is 1.1 and it has averaged 1.8 over the past 5 years with a high of 2.8 and low of 0.9. Iamgold's current P/S ratio is 2.2 and it has averaged 4.5 over the past 5 years with a high of 6.9 and low of 1.9.
Price Target: The consensus price target for the analysts who follow Iamgold is $21. That is upside of 123% from today's stock price of $9.42 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: Iamgold is currently trading at about $9 a share with analysts expecting EPS of $1.64 next year, an earnings increase of 25% y/y, for a forward P/E ratio of 5.7. Taking a look at the company's publicly traded comparisons will give us a better idea of the stock's relative valuation. Randgold Resources (NASDAQ:GOLD) is currently trading at about $73 a share with analysts expecting EPS of $6.98 next year, an earnings increase of 11% y/y, for a forward P/E ratio of 10.5. Eldorado Gold (NYSE:EGO) is currently trading at about $10 a share with analysts expecting EPS of $0.84 next year, an earnings increase of 20% y/y, for a forward P/E ratio of 12.2. Agnico-Eagle Mines (NYSE:AEM) is currently trading at about $34 a share with analysts expecting EPS of $2.34 next year, an earnings increase of 28% y/y, for a forward P/E ratio of 14.5. The mean forward P/E of Iamgold's competitors is 12.4 which suggests that Iamgold is undervalued relative to its publicly traded competitors.
Earnings Estimates: Iamgold has beat EPS estimates 1 time in the past 4 quarters. The company's EPS figures have come in between -10 cents and 5 cents from consensus estimates or about -34.5% to 16.1% 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 or downside from earnings surprises.
Price Action: Iamgold is down 53.1% over the past year, underperforming the S&P 500, which is up 2.2%. Looking at the technicals, the stock is currently below its 50 day moving average, which sits at $12.60 and below its 200 day moving average, which sits at $17.22.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.