Newmont Stock Pops 34% in 6 Months: Is it Still a Screaming Buy?
Recent Performance Overview
Newmont Corporation’s NEM shares have experienced a remarkable climb, surging 33.6% over the past six months and significantly outperforming the mining-gold industry, which saw a rise of just 16.6%. This uptick in stock value can primarily be attributed to a sharp increase in gold prices, fueled by a combination of monetary policy easing and escalating geopolitical tensions.
Currently, NEM shares are trading at a discount of roughly 6% compared to their 52-week high of $56.30, which was reached on September 25, 2024. Technical indicators further support this bullish sentiment, as Newmont has maintained trading above the 50-day simple moving average (SMA) since July 3, 2024. A golden crossover that occurred on May 13, 2024, reinforced this positive trend, with the 50-day SMA staying above the 200-day moving average—signifying an upward trajectory in stock performance.
Key Growth Projects and Strategic Acquisitions
Is now the time to consider adding NEM shares to your portfolio? To answer this, it’s essential to explore the company’s fundamentals and growth strategies. Newmont is proactively investing in several key projects aimed at enhancing production capacity and extending the operational lifespan of its mines. Noteworthy projects include:
- Tanami Expansion 2 in Australia
- Ahafo North expansion in Ghana
- Cadia Block Caves in Australia
Moreover, the recent acquisition of Newcrest Mining Limited has allowed Newmont to bolster its portfolio, emerging as a leader in both gold and copper production across some of the most favorable mining jurisdictions worldwide. This merger is expected to yield significant value for shareholders, with projected pre-tax benefits of $500 million annually by the end of 2025.
Strong Financial Health Reinforces Capital Allocation
Newmont boasts a solid liquidity position, generating substantial cash flows that facilitate funding for growth initiatives, fulfilling short-term debt commitments, and enhancing shareholder value. By the close of the second quarter of 2024, Newmont reported liquidity of $6.8 billion, including approximately $2.6 billion in cash and cash equivalents. Notably, operating cash flow has seen a year-over-year increase of over 100%, reaching about $1.4 billion in the latest quarter.
NEM’s free cash flow was reported at $594 million, allowing the company to return approximately $539 million to shareholders through dividends and share buybacks. The stock currently offers a dividend yield of 1.9%, with a payout ratio of 47%, signaling a sustainable dividend strategy supported by a five-year annualized growth rate of 6.8%.
Benefits From Rising Gold Prices
As a leading gold producer, Newmont is poised to gain significantly from the current surge in gold prices, which reached remarkable levels this year. The recent rally was sparked by a 50-basis-point cut in interest rates by the U.S. Federal Reserve, with gold peaking at $2,685.42 per ounce on September 26, 2024. This upward trend has captured the attention of investors as safe-haven demand increases amidst geopolitical unrest, including heightened tensions in the Middle East.
Future Earnings Projections
Positive momentum is reflected in analysts’ earnings estimates for NEM, which have been trending upward over the last 60 days. The consensus estimate for 2024 earnings is set at $3.00, indicating a projected year-over-year growth of 86.3%. Expectations for 2025 signal an additional growth rate of around 18.4%. Newmont’s long-term earnings per share (EPS) growth rate is 39.3%, outpacing the industry average of 25.5%.
Valuation & Competitive Performance
At present, Newmont is trading at a forward earnings multiple of 15.46X, reflecting a modest premium compared to the industry average of 15.03X. This valuation appears justifiable given the company’s stable earnings growth trajectory.
Over the past year, NEM shares have gained 40.8%, trailing the mining gold industry’s rise of 45.9%, but outperforming the S&P 500, which increased by 32.4%. Notably, major competitors, including Barrick Gold Corporation (GOLD), Agnico Eagle Mines Limited (AEM), and Kinross Gold Corporation (KGC), recorded gains of 33.9%, 68.8%, and 97.3%, respectively.
Conclusion: Is NEM a Buy?
Newmont presents an attractive investment proposition characterized by a robust portfolio of growth projects, solid financial health, and favorable technical indicators. Additionally, a healthy growth outlook, rising earnings estimates, and an appealing dividend yield further accentuate its investment case. With gold prices trending upward, driving profitability and cash flow generation, investing in Newmont appears to be a prudent decision for those looking to capitalize on the ongoing gold rally. Thus, NEM remains a strong Rank #2 (Buy) stock for investors in the current market climate.