Barrick Gold Corporation
Barrick Gold Corporation (NYSE: GOLD) is a Canadian gold mining company that focuses on the production and sale of gold and copper and other related activities such as exploration and mine development. Argentina, Australia, Canada, Chile, Dominican Republic, Papua New Guinea, Peru, Saudi Arabia, the United States, and Zambia all have mining operations.
Why Should Investors Book Profit?
- Low ROE: GOLD reported ROE of 8.6% in FY21 compared to Industry Median of 9.1%.
- High Cash Conversion Days: Compared to the industry, the company has a long Cash Conversion Cycle (Days), meaning that it takes more days to convert its sales to cash. As of FY21, its Cash Cycle was 81 days, compared to an industry median of 63 days.
- Technical weakness: GOLD’s price moved up by 26.75% from the recommended entry price and made a high of USD 25.91 on April 11, 2022. Price reached a crucial resistance level of USD 25.91 but were unable to break this level, indicating the possibility of a downside correction which may lead the prices towards the resistance turned support level USD 23.60. On the daily chart, RSI (14-period) is reached an overbought zone at 70.91 levels, supporting a downside correction. However, prices are still sustaining above the trend-following indicators 21-period SMA and 50-period SMA and may act as the support levels for the stock.
Valuation Methodology: Price/Cash Flow Based Relative Valuation
(Analysis by Kalkine Group)
* % Premium/(Discount) is based on our assessment of the company's FY1 trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.
Stock Recommendation:
GOLD's share price has inclined 36.95% in the past six months and is currently leaning towards the higher band of the 52-week range of USD 17.27 to USD 26.07. We have valued the stock using the Price/Cash Flow-based relative valuation methodology and arrived at a target price of USD 22.89.
Considering the company's longer cash cycle, industry below ROE, current valuation and associated risks. we recommend a "Sell" rating on the stock at the closing price of USD 25.44, up 0.16% as of April 12, 2022.
Three-Year Technical Price Chart (April 12, 2022). Source: REFINITIV, Analysis by Kalkine Group
* The reference data in this report has been partly sourced from REFINITIV.
* All forecasted figures and industry information have been taken from REFINITIV.
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