Is it a good company at a reasonable price? The price is expensive by my tests but it may not be expensive. I only have a gold stock so I will pay attention to materials stock on the TSX. Between energy (excluding utility companies) and materials companies, they consist of between 1% and 2% of my portfolio. This is just so I pay attention to this section of the TSX.
I own this stock of Barrick Gold Corp (TSX-ABX, NYSE-GOLD). 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. However, this is a resource stock and I only buy resource stocks so I pay attention to that aspect of the TSX. I plan to have only a small stake in any resource stock.
When I was updating my spreadsheet, I noticed that analyst expected the EPS to drop by 1.8% but it dropped by 13%. Analysts expected the Revenue to drop by 1%, but it dropped by 4.8%. Analysts expected the Free Cash Flow to drop by 9%, but it dropped by 42%. The analysts’ estimates for 2022 are similar to that of 2021. That is, they expect the revenue and EPS (and AEPS) in 2022 to be about the same as for 2021.
With my investment in this stock, I have a total return of 10.51% per year with 9.12% from capital gains and 1.39% from dividends. I have had this stock for almost 9 years. A problem is that the dividends are paid in US$, so you never know exactly what the dividends are going to be in CDN$.
If you had invested in this company in December 2011, $1,015.30 you would have bought 22 shares at $46.15 per share. In December 2021, after 10 years you would have received $82.43 in dividends. The stock would be worth $529.10. Your total return would have been $611.53.
If you had invested in this company in December 20131, $1,010.34 you would have bought 54 shares at $18.71 per share. In December 2021, after 8 years you would have received $133.17 in dividends. The stock would be worth $1,298.70. Your total return would have been $1,431.87.
You cannot time the market, but you can ensure you buy at a reasonable price. If you noticed, the purchase 10 years ago was near a peak and the purchase 8 years ago with near a valley.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $46.15 | $1,015.30 | 22 | 10 | $82.43 | $529.10 | $611.53 |
| $18.71 | $1,010.34 | 54 | 8 | $133.17 | $1,298.70 | $1,431.87 |
The dividend yields are low with dividend growth lately at a high level. The current dividend yield is low (below 2%) at 1.59%. The 5, 10 and historical dividend yields are also low at 1.26%, 1.31% and 1.11%. The dividend growth over the past 5 years is at 33% CDN$ and 35% in US$. The last dividend increase was 2022 and it was for 11% (US$).
The Dividend Payout Ratios (DPR) are good. The DPR for EPS for 2021 is 67% with 5 year coverage at 33%. This company gives out also and Adjusted EPS (AEPS) with a DPR for 2021 of 25% and 5 year coverage at 39%. The DPR for Cash Flow per Share for 2021 is 20% with 5 year coverage at 10%. The DPR for Free Cash Flow (FCF) is 28% with 5 year coverage at 25%.
Debt Ratios are good. The Long Term Debt/Market Cap Ratio is low and good at 0.15. The Liquidity Ratio is high and good at 3.95. The Debt Ratio is high and good at 3.22. Leverage and Debt/Equity Ratios are low and good at 1.97 and 0.61 respectively.
The Total Return per year is shown below for years of 5 to 35 to the end of 2021 in CDN$. Under the Capital Gain column is the portion of the Total Return attributable to capital gains. Under the Dividend column is the portion of the Total Return attributable to dividends. See chart below.
| From | Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|---|
| 2016 | 5 | 33.55% | 3.94% | 2.28% | 1.66% |
| 2011 | 10 | -1.31% | -5.19% | -6.31% | 1.12% |
| 2006 | 15 | 3.92% | -1.30% | -2.63% | 1.32% |
| 2001 | 20 | 1.33% | 1.19% | -0.28% | 1.47% |
| 1996 | 25 | 3.53% | -0.80% | -1.94% | 1.14% |
| 1991 | 30 | 5.19% | 2.92% | 1.37% | 1.55% |
| 1986 | 35 | 11.03% | 9.78% | 6.52% | 3.26% |
The Total Return per year is shown below for years of 5 to 35 to the end of 2021 in US$. Under the Capital Gain column is the portion of the Total Return attributable to capital gains. Under the Dividend column is the portion of the Total Return attributable to dividends. See chart below.
| From | Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|---|
| 2016 | 5 | 35.10% | 5.20% | 3.52% | 1.68% |
| 2011 | 10 | -3.42% | -7.25% | -8.31% | 1.06% |
| 2006 | 15 | 3.34% | -1.74% | -3.15% | 1.41% |
| 2001 | 20 | 2.49% | 2.70% | 0.88% | 1.82% |
| 1996 | 25 | 3.85% | -0.40% | -1.64% | 1.24% |
| 1991 | 30 | 6.46% | 2.56% | 1.04% | 1.52% |
| 1986 | 35 | 11.12% | 10.05% | 6.82% | 3.24% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 11.24, 14.31 and 17.37. The corresponding 10 year ratios are 2.01, 2.42 and 2.83. (These are low due to earnings losses.) The corresponding historical ratios are 16.84, 23.82 and 28.72. The current P/E Ratio is 22.13 based on a stock price of $31.79 CDN$ and ES of $1.14. If you compared the current ratio to the 5 year ratios, which is a logical thing to do, the current one is above the 5 year median ratio . On an absolute basis, a P/E Ratio of 22.13 is on the high side. This stock price testing suggests that the stock price is relatively expensive.
I get a Graham Price of $23.35. The 10 year low, median, and high median Price/Graham Price Ratios are 0.81, 1.07 and 1.34. The current ratio is 1.36 based on a stock price of $31.79. The current ratio is above the 10 year median ratios. This stock price testing suggests that the stock price is relatively expensive.
I get a 10 year median Price/Book Value per Share Ratio of 1.81. The current P/B Ratio is 1.88 based on a stock price of $25.20, Book Value of $23,857M and Book Value per Share of $13.42. The current ratio is 4% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median. This testing is in US$ and you would get similar results in CDN$.
I also have a Price/Book Value per Share ratio based on an estimate. This ratio is 1.83 and is based on a stock price of $25.20, Book Value per Share estimate for 2022 of $13.80 and a Book Value of $24,539M. This P/B Ratio is 1% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median. This testing is in US$ and you would get similar results in CDN$.
I get a 10 year median Price/Cash Flow per Share Ratio of 7.74. The current P/CF Ratio is 10.24 based on Cash Flow per Share estimate for 2022 of $2.46, Cash Flow of $4,374M and a stock price of $25.20. The current ratio is 32% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive. This testing is in US$ and you would get similar results in CDN$.
I get an historical median dividend yield of 0.95%. The current dividend yield is 1.59% based on dividends of $0.50 and a stock price of $31.79. The current dividend yield is 67% above the historical median ratio. This stock price testing suggests that the stock price is relatively cheap. This testing is in CDN$ and you would get similar results in US$.
I get a 10 year median dividend yield of 1.30%. The current dividend yield is 1.59% based on dividends of $0.50 and a stock price of $31.79. The current dividend yield is 22% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap. This testing is in CDN$ and you would get similar results in US$.
The 10 year median Price/Sales (Revenue) Ratio is 2.34. The current P/S Ratio is 3.75 based on Revenue estimate for 2022 of $11,957M, Revenue per Share of $6.72 and a stock price of $25.20. The current ratio is 60% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive. This testing is in US$ and you would get similar results in CDN$.
Results of stock price testing is that the stock price is probably expensive. The testing using the dividend yield and P/S Ratio is at odds, with the dividend yield test saying that the stock price is cheap and the P/S Ratio test saying the stock price is expensive. The reason that the stock passes the dividend yield tests is that the dividends have been raised sharply lately. They are up 33% per year over the past 5 years. I will go with the P/S Ratio test as Revenues are important because without revenues, earnings and cash flows cannot be pushed higher. The P/CF Test also say that the stock price is expensive.
The thing with this stock is that the stock price has had peaks in the past before declining. It peaked at $44.25 in 1996 before dropping to $19.20. It peaked again in 2010 at $55.25 before dropping to $7.90. Considering the other peaks, this stock may have a way to go to its next peak. My usual method of testing the stock price may not work on this stock. So, the price might still be reasonable or cheap.
Last year I said that the results of stock price testing were that the stock price was reasonable. The dividend yield tests say it is cheap, but this is not confirmed by the P/S Ratio testing which says the stock is expensive. The stock price is probably reasonable. Most of the test support a reasonable stock price. A gain of 16.60% is a reasonable gain.
When I look at analysts’ recommendations, I find Strong Buy (10), Buy (10) and Hold (5). The consensus would be a Strong Buy. The 12 month consensus stock price is $33.88 ($26.89 US$). This implies a total return of 8.17% with 6.59% from capital gains and 1.59% from dividends based on a stock price of $31.79.
When I looked at analysts’ recommendations last year, I found recommendations of Strong Buy (11), Buy (9), Hold (3) and Underperform (1). The consensus would be a Strong Buy. The 12 month stock price consensus was $36.65 ($29.22 US$). This implies a total return of 34.20% with 1.63% from dividends and 32.56% from capital gains based on a stock price of $27.65 (22.09 US$). What happened was the stock price went to $31.79 a gain of 16.60% with 14.97% from capital gains and 1.63% from dividends. So, analysts were off quite a bit.
The last two analyst’s comments on Stock Chase are Do not Buy and Top Pick. The Do Not Buy does not like gold mining companies. Stock Chase gives this company 5 stars out of 5. Adam Othman on Motley Fool think material stocks are an ideal investment for volatile market conditions. Andrew Walker on Motley Fool thinks this stock is currently cheap. In a Press Release this company talks about its fourth quarter results. Rithika Krishna in a report from Reuters on Yahoo Finance says production will fall for the first quarter of 2022.
Barrick Gold Corp is one of the world's largest gold producers, operating mines in North America, South America, Australia, and Africa. The company segments consist of nine gold mines namely Carlin, Cortez, Turquoise Ridge, Pueblo Viejo, Loulo-Gounkoto, Kibali, Veladero, North Mara, and Bulyanhulu. Geographically, it derives a majority of revenue from the United States. Its web site is here Barrick Gold Corp .
The last stock I wrote about was about was Leon's Furniture Ltd (TSX-LNF, OTC-LEFUF) ... learn more. The next stock I will write about will be Pembina Pipelines Corp (TSX-PPL, NYSE-PBA) ... learn more on Friday, April 22, 2022 around 5 pm. Tomorrow on my other blog I will write about Common Sense.... learn more on Thursday, April 21, 2022 around 5 pm.
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.
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