A Value Walk Among Gold Stocks

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Newmont Mining Corp. (NYSE: NEM) has a price-to-book value of 1.14 to 1. Newmont’s market cap is almost $11.5 billion and its forward P/E is about 16. With a consensus target price of $26.74 from Thomson Reuters, Newmont has an implied upside of 17%. Its shares closed Friday at $22.89, and the 52-week price range is $20.79 to $35.44.

Barrick Gold Corp. (NYSE: ABX) has a 1.38-to-1 price-to-book value ratio. Its market cap is $18.76 billion, and its forward P/E is less than 13.5. Barrick shares closed at $16.11, and the 52-week trading range is $13.43 to $21.68. With a consensus target price of $20.50, Barrick has an implied upside of 27%.

Silver Wheaton Corp. (NYSE: SLW) is of course more silver than gold, but the company has tried to get more gold into its mix. We think that will continue ahead, particularly if the company can make selective acquisitions along the way via operational purchases or royalty purchases. Silver Wheaton posts a 2.14-to-1 price-to-book value ratio, which is higher than its peers. Its market cap is $7.34 billion, and it has a consensus target price of $30.29. Silver Wheaton closed at $20.54 and the 52-week trading range is $17.75 to $29.17. Silver Wheaton has significant upside of 47% if the analysts are correct.

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Goldcorp Inc. (NYSE: GG) screens out as a “value stock” with a price-to-book value ratio of 0.97 to 1 — a discount to book value. Its market cap is $19.00 billion, which means that it may be too big for an acquirer. Another issue is that its forward P/E of 22 makes it one of the more expensive gold players (assuming analysts are right). Goldcorp shares closed at $23.37, and the 52-week trading range is $20.54 to $32.15. With a consensus target price of $30.12, Goldcorp has an implied upside of 28.9%.

Royal Gold Inc. (NASDAQ: RGLD) posts a 1.74-to-1 price-to-book value, but this is a royalty player rather than an operator in gold itself. Its market cap is $4.1 billion, and its forward P/E is roughly 40. The issue with this high P/E ratio is that the estimates are based on a June year-end rather than a normal calendar year. Royal Gold shares closed at $62.72, and the 52-week trading range is $38.63 to $72.90. With a consensus target price of $75.16, Royal Gold has an implied upside of 20%.

What investors need to consider is that gold miners have almost unilaterally cut their dividends. The yields in most cases are now too small again to bother reporting. That being said, now you have a picture of how some of the North American gold and silver players are valued by Wall Street. There seems to be some opportunity here, as well as some risk.

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