Eldorado Gold Stock is convinced
Eldorado Gold (NYSE:EGO, 30-year Financials) stock is estimated to be at fair value, according to GuruFocus Value’s calculation. GuruFocus Value is GuruFocus’ estimate of the fair value at which the stock should trade. It is calculated based on the historical multiples at which the stock has traded, past business growth and analysts’ estimates of the company’s future performance. If a stock’s price is significantly above the GF value line, it is overvalued and its future performance may be poor. On the other hand, if it is significantly lower than the GF value line, its future return is likely to be higher. At its current price of $11.65 per share and market capitalization of $2.1 billion, Eldorado Gold’s stock is estimated at fair value. The GF value for Eldorado Gold is shown in the table below.
Because Eldorado Gold is priced at fair value, its long-term stock return should be close to its company’s growth rate, which has averaged 31.2% over the past five years. .
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Investing in companies with weak financial strength presents a higher risk of permanent loss of capital. Thus, it is important to carefully consider the financial strength of a company before deciding whether or not to buy its shares. Looking at the cash-to-debt ratio and interest coverage is a great starting point for understanding a company’s financial strength. Eldorado Gold has a cash-to-debt ratio of 1.03, which is worse than 71% of companies in the metals and mining sector. GuruFocus rates Eldorado Gold’s overall financial strength as 6 out of 10, indicating that Eldorado Gold’s financial strength is fair. Here is Eldorado Gold’s debt and cash flow over the past few years:
It is less risky to invest in profitable businesses, especially those with consistent long-term profitability. A business with high profit margins is generally a safer investment than those with low profit margins. Eldorado Gold has been profitable 5 in the last 10 years. Over the past twelve months, the company has had revenue of $1 billion and earnings of $0.67 per share. His the operating margin is 25.93%, which ranks better than 82% of companies in the metals and mining sector. Overall, Eldorado Gold’s profitability is ranked 6 out of 10, indicating reasonable profitability. Here are the revenues and net profit of Eldorado Gold over the past few years:
One of the most important factors in evaluating a business is growth. According to research from GuruFocus, long-term stock performance is highly correlated with growth. Companies that grow faster create more value for shareholders, especially if that growth is profitable. Eldorado Gold’s average annual revenue growth is 31.2%, which ranks better than 92% of companies in the metals and mining sector. The average 3-year EBITDA growth is 72.3%, which ranks better than 98% of companies in the metals and mining sector.
A company’s profitability can also be assessed by comparing its return on invested capital (ROIC) to its weighted average cost of capital (WACC). Return on Invested Capital (ROIC) the extent to which a company generates cash flow relative to the capital it has invested in its business. The weighted average cost of capital (WACC) is the rate that a company is expected to pay on average to all its security holders to finance its assets. If the return on invested capital exceeds the weighted average cost of capital, the company is likely creating value for its shareholders. Over the past 12 months, Eldorado Gold’s ROIC is 3.52 while its WACC is 8.83. Eldorado Gold historical ROIC vs WACC comparison is shown below:
In summary, Eldorado Gold (NYSE:EGO, 30-year Financials) stock is valued at fair value. The company’s financial situation is correct and its profitability is correct. Its growth ranks better than 98% of companies in the metals and mining industry. To learn more about Eldorado Gold stock, you can view its 30-year financial statements here.
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