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What are we looking for?

The consumer price index (CPI) in the United States was up 6.5 per cent year over year in December. CPI peaked at 9.1 per cent in June and the trend has been down since. Slowing inflation reduces the likelihood of sustained central bank rate hikes which reduces strength in the U.S. dollar and is supportive for gold prices. With that backdrop, what are the StockCalc models telling us for equity valuations in this space?

The screen

We used StockCalc’s screener to select the top 10 listed gold mining companies by market capitalization on the TSX. We then used StockCalc’s valuation tools to calculate fundamental (or intrinsic) valuation for each stock to see if it is undervalued or overvalued compared with its price.

Overview of the techniques used:

  • Discounted cash flow (DCF value) is a valuation technique in which cash-flow projections are discounted back to the present to calculate value per share;
  • A price comparables (price comps) technique values the company on the basis of ratios from selected comparable companies;
  • An adjusted book value (ABV) is calculated by multiplying book value per share by its 10-year average price-to-book ratio.
  • If we have analyst coverage, we look at the consensus target price.

More about StockCalc

StockCalc is a fundamental valuation platform with tools to calculate and report on value per share for thousands of public companies listed on major North American stock exchanges. StockCalc also contains numerous tools to understand what the stocks you are investing in are worth. Globe Unlimited subscribers can subscribe to StockCalc using the promo code Globe30, which offers a 30-day free trial and special pricing for the second month.

What we found

Gold stocks

NameTickerMarket Cap ($ Mil)Recent Close ($)StockCalc Val ($)Diff (%)DCF Value($)Price Comps($)ABV ($)Analyst Target ($)1 Year Return(%)Dividend Yield(%)
Barrick GoldABX-T4466725.3525.952.422.9328.1330.6738.535.12.9
Agnico Eagle MinesAEM-T3430975.2572.75-3.316.4964.97194.06112.4018.02.8
Wheaton Precious MetalsWPM-T2733060.4759.71-1.324.6126.4141.8290.0117.41.3
Kinross GoldK-T81236.326.14-2.9-3.204.987.009.75-10.92.5
Endeavour MiningEDV-T797733.0237.6113.946.8337.3038.3152.5116.63.3
Yamana GoldYRI-T78898.217.63-7.11.448.124.4210.2853.81.9
Alamos GoldAGI-T588614.9612.52-16.3-3.097.859.5219.0068.00.9


You can see in the accompanying table the percentage difference between each stock’s recent close price and its intrinsic value. The StockCalc valuation column is a weighted calculation derived from our models and analyst target data if used.

These stocks have a high correlation to the price of gold. I ran the correlation coefficients (or r2 – a measure of fit ranging between 0 – for no fit, and 1 – for perfect fit) between their closing price and the price of gold over the past 12 months and most had an r2 > 0.8. Only Alamos and Yamana were below 0.5.

So where is gold heading? Consensus is higher. If the economy moves into recession, we would expect slowing or even pausing of central bank rate hikes and a weakening U.S. dollar. For perspective, in the 1970s when inflation averaged over 7 per cent and hit a high of 14 per cent in 1980, the U.S. dollar weakened in the months prior to the Fed pausing, then strengthened when inflation persisted.

All stocks on this list are dividend payers, which is uncommon for any of the industries in the basic materials sector. Also of note is that every analyst consensus on this list is above closing price, whereas our models are split and unlike the rest of the market, except for energy stocks, most of these companies are up over the past 12 months.

Let’s look at a couple of these companies:

Newmont Corp. (NGT-T) is primarily a gold producer with operations in North and South America, Australia and Africa. Newmont also produces copper, silver, lead and zinc. With a global focus on ESG in the commodities space, being recognized for ESG efforts is increasingly important. Newmont were again added to the Dow Jones Sustainability World Index (DJSI World), being ranked No. 1 out of 147 companies in the metals and mining industry. Newmont will release their 2023 guidance and longer-term outlook on Feb. 23, 2023. Our comparables, adjusted book, along with analyst targets are all above current price for NGT-T.

Endeavour Mining (EDV-T) operates in West Africa (Senegal, Ivory Coast and Burkina Faso) and produces 1.5 million ounces of gold annually. The company has an interesting and transparent dividend program tied both to the price of gold (remaining above US$1,500) and their financial leverage (remaining below 0.5 times net debt/adjusted EBITDA). All of our models show further upside to its price.


Investing involves risk. StockCalc accepts no liability whatsoever for any loss or damage arising from the use of this analysis.

Brian Donovan, CBV, is the president of StockCalc, a Canadian FinTech based in Miramichi, N.B. He currently holds positions in WPM, EDV and BTO.

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