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Gold stocks that stand out from the crowd Add to ...

Michael Bowman of Wickham Investment Counsel sifts through TSX-listed producers with a market cap of more than $500-million

Mr. Bowman is a portfolio manager at Hamilton-based Wickham Investment Counsel Inc., an adviser to high-net-worth clients. mike@mikebowmangroup.com

What are we looking for?

Gold stocks that stand out from the crowd.

The screen

My colleague Rob Belanger and I looked at gold companies listed on the TSX that are over $500-million in market capitalization; we eliminated royalty companies.

EV/EBITDA (enterprise value divided by the earnings before interest, taxes, depreciation and amortization) is used to determine the value of a company. This metric looks at a firm the way a potential acquirer would, because it takes debt into account, while other multiples, such as price-earnings ratios, do not. A company with a low EV/EBITDA could be viewed as an attractive takeover candidate. We are showing analysts’ consensus estimates for the next 12 months.

Earnings per share (EPS) is generally considered to be the single most important variable in determining a company’s share price since it is an indicator of a company’s profitability. It is defined as the net income minus any dividends paid out on preferred shares, divided by the average number of outstanding shares. We are showing the past one year growth in percentage terms.

Our screen also indicates gold produced, and sold, in millions of ounces, in the past 12 months.

The total cash costs of an ounce produced is a very important element in analyzing gold companies.

Gold reserves per share are the number of ounces of gold reserves that are proven and probable.

What did we find?

Centerra Gold has operations in the former Soviet Union and other emerging markets worldwide. It has the lowest EV/EBITDA, and is the only company with a positive EPS growth.

Primero Mining has the highest cost per ounce, while Yamana Gold has the lowest.

Barrick Gold has the most reserves per share, followed by Agnico Eagle. Barrick is also the largest company in terms of production, and has a respectable cost per ounce, and EV/EBITDA.

Semafo has exploration and production activities in West Africa and has the smallest amount of reserves of the companies on our list.

Investors should contact an investment professional or conduct further research before investing in any of the stocks mentioned here.

Canadian bullion producers

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