Friday, April 15, 2016

Barrick Gold Corp.

Sound bite for Twitter and StockTwits is: Perhaps stock is cheap. If you look at absolute stock value, the stock price today is less than half of what it was worth even 5 years ago. On this basis, the stock is cheap. I looked at P/S and P/CF Ratios and they show stock price is relatively cheap to reasonable. However in the last two years, Revenue and Cash Flow estimates have been way off. See my spreadsheet on Barrick Gold Corp.

I own this stock of Barrick Gold Corp. (TSX-ABX, NYSE-ABX). I bought some of this stock in April 2013 because its stock price had fallen hard. I believed the market over reacted. I just bought 100 shares as I am living off my portfolio and do not have much to invest. I bought another 100 shares in 2016.

To date I have made 15.7% total return on this stock with 14.4% from capital gains and 1.3% from dividends. I did not buy this stock for its dividends; I bought it for capital gain. My total gain is 33.3%.

This stock has not done well over the past 5 years. Revenue and earnings are down. Even if you look at the adjusted earnings the company put outs, earnings are down. Cash Flow and CFPS were down in 2013 and 2014, but increased in 2015.

I have had this stock for 3 years and I have made a good return. For people who had this stock for the past 5 and 10 years, they have losses. This stock is down by 14.4% and 4.2% per year over the past 5 and 10 years when you look at total return (that is capital gains or losses and dividends).

When I look at the 5 year and 10 years Price/Earnings per Share Ratios, I find that they are unusable due the number of years with EPS losses. The historical low, median and high median P/E Ratios are 15.64, 22.29 and 23.38. These seem reasonable. The current P/E Ratio is 37.04 based on a stock price of $20.09 and earnings of $0.42 US$ or $0.54 CDN$.

The only tests that show this stock as being reasonable to cheap are the P/S Ratio test and the P/CF Ratio test. First I will look the P/S Ratio test. The current P/S is 2.29 using 2016 Revenue estimate for of $7964M US$ and a stock price of $20.04 CDN$ or $15.64 US$. The 10 years median P/S Ratio based on closing US$ price is 3.61. A P/S of 2.29 is some 37% lower than the 2016 estimate of 3.61. This stock price testing suggests that the stock price is cheap.

Testing using P/CF Ratio, I get a current P/CF Ratio of 8.23 based on CFPS estimate for 2016 of $1.90 US$ and stock price $15.64 US$. The 10 year median P/CF Ratio using closing P/CF Ratios is 7.48. The current P/CF Ratio is some 10% higher than the 10 year median. This stock price testing suggests that stock price is reasonable, but above the median.

When I look at analysts' recommendations, I find Strong Buy, Buy and Hold recommendations. Most of the recommendations are a hold and the consensus recommendation would be a Buy. The 12 month stock price consensus is $14.24 US$. This is lower than the current stock price of $15.64 US$. Therefore the total return would be a loss of 8.44 with capital loss of 8.95% and dividends at 0.51%.

Courage & Conviction Investing at Seeking Alpha has good reasons to say this stock is currently a sell. Andrew Walker at Motley Fool says why he thinks it is a good time to buy some Barrick stock. Doug Alexander of Bloomberg News says in the Financial Post that the Chairman's total compensation was cut by 76% after it was criticized.

I will have only one entry for this stock this year. However, I did a more complete report on this company in 2015 and you can see those reports here andhere.

The last stock I wrote about was Russel Metals Inc. (TSX-RUS, OTC-RUSMF)... learn more . The next stock I will write about will be Leon's Furniture Ltd. (TSX-LNF, OTC-LEFUF)... learn more on Friday, April 15, 2016 around 5 pm.

Also, on my book blog I have put a review of the book Wired for Culture by Mark Pagel learn more...

Barrick Gold Corporation is a gold mining company with a portfolio of operating mines, and advanced exploration and development projects located across five continents. Its web site is here Barrick Gold Corp.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.

See my website for stocks followed and investment notes. Follow me on Twitter or StockTwits.

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