Section 1: Company Overview and Fundamentals
1.1 Company Overview:
Newmont Corporation is a gold producer. The company also produces lead, zinc, lead alloy, copper, and silver. North America, South America, Australia, Africa, and Nevada are its five operating segments. The amount of gold in the company's reserve is around 92.8 million ounces. Additionally, it has an interest in the properties in Heart Peaks, Castle, Moat, Coyote, and North ROK.
1.2 The Key Positives, Negatives, and Investment summary
1.3 Key Metrics:
Except for FY21's gross profit, the firm's sales and gross profit have increased during the previous five years, as seen in the graph below. Because gold prices fell in FY21 after reaching an all-time high of USD 2,075 in August, gross profit was reduced. Moreover, both revenue and gross profit have generated an impressive five-year CAGR of 11.60% and 16.89% respectively. Finally, it is apparent that during the past two years, the firm has been successful in keeping its gross margins over 50%.
1.4 Dividend history:
As can be seen from the chart, NEM has a consistent history of dividend distribution over the last decade. The Board of Directors of Newmont Corporation has recently declared a dividend for the second quarter of 2022 of USD 0.55 per share of common stock. The dividend is due on September 22, 2022, to stockholders of record as of the close of business on September 8, 2022.
1.5 Gold Price analysis:
Indicators suggest that the United States will experience a recession soon. Due to the strain that rising inflation is having on household finances, consumer confidence in the US is also declining. Following Russia's continuous invasion of Ukraine, geopolitical uncertainty has increased. These elements may finally support an upward trend in gold prices up until geopolitical and macroeconomic stability is established. This might be advantageous for Newmont, as the firm previously estimated that every USD 100 increase in the price of gold per ounce resulted in a USD 400 million boost in free cash flows. Newmont obtains most of its income from gold (approximately 89% in Q2 2022).
In addition, the price of gold has increased since reaching the 52-week low of USD 1,681 on July 21, 2022, as seen in the figure below. Gold's price has increased after forming a bullish divergence at the bottom, and the nearest resistance appears to be around USD 1,805 per ounce. If USD 1,805 is breached, Gold is likely to give a good rebound to the upside.
1.6 Top 10 shareholders:
The top 10 shareholders together form ~39.22% of the total shareholding. The Vanguard Group, Inc. and BlackRock Institutional Trust Company are holding the maximum stake in the company at ~8.43% and ~5.97%, respectively.
Section 2: Business Updates and Financial Highlights
2.1 Recent Updates:
The below picture gives an overview of the recent updates:
2.2 Insights of Q2FY22:
Section 3: Key Risks and Outlook
Section 4: Stock Recommendation Summary:
4.1 Price Performance and Technical Summary:
4.2 Fundamental Valuation
Valuation Methodology: EV/Sales Multiple Based Relative Valuation
Markets are trading in a highly volatile zone currently due to certain macro-economic and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.
Note 1: Past performance is not a reliable indicator of future performance.
Note 2: The reference data in this report has been partly sourced from REFINITIV.
Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.
Note 4: The report publishing date is as per the Pacific Time Zone.
Technical Indicators Defined: -
Support: A level at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock.
Resistance: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Resistance 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Resistance 2 may act as the crucial resistance level for the stock.
Stop-loss: It is a level to protect further losses in case of unfavorable movement in the stock prices.
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