With ongoing geopolitical tensions, increasing investments by central banks in gold, anticipated interest rate cuts by the Federal Reserve, and jewelry demand, gold prices have soared to record highs in 2024. Further, various analysts expect that there will be continued gold strength.
Given the industry’s shiny prospects, investors could consider buying fundamentally sound gold stocks DRDGOLD Limited (DRD), Harmony Gold Mining Company Limited (HMY), and Centamin plc (CELTF) for exciting returns.
Gold has experienced a considerable surge in its value this year. The yellow metal rose by more than 13% in the first quarter of 2024, solidifying its position as one of the best-performing asset classes. The rally was mainly driven by interest rate cut expectations, geopolitical instability, and the precious metal’s appeal as a safe haven asset.
However, gold prices stabilized recently due to reduced risk premiums over tensions in the Middle East, while upcoming economic data could provide clues to the Fed’s interest rate path. Spot gold was flat at $2,322.09 per ounce by 1:45 p.m. ET on April 24, after touching its bottom since April 5 in the prior session. U.S. gold futures settled 0.2% lower at $2,338.4.
Jonathan Rose, Genesis Gold Group CEO, said, “In the long term, gold will rise further, with 2024 being an election year, persistent geopolitical conflict, and increasing U.S. debt.”
According to a market veteran, gold prices could soar as high as $3,500 an ounce through the end of 2025 if inflation surges to a second peak, implying a nearly 50% upside for gold.
Moreover, the demand for gold as jewelry is rising steadily, accounting for a 48.7% share of the global demand in 2023, which came at about 2,168 metric tons, positioning it as the largest gold-demanding industry worldwide. Besides, harnessed through such solid demand, world production of gold mines has grown substantially to about 3,000 metric tons in 2023.
In light of these encouraging trends, let’s look at the fundamentals of the three best Miners - Gold stocks, beginning with number 3.
Stock #3: DRDGOLD Limited (DRD)
Headquartered in Johannesburg, South Africa, DRD is a gold mining company engaged in the surface gold tailings retreatment business. The company is also involved in the exploration, extraction, processing, and smelting activities. It recovers gold from surface tailings in the Witwatersrand basin in Gauteng province.
DRD’s trailing-12-month EBIT margin and net income margin of 24.72% and 22.97% are 121.8% and 348.9% higher than the respective industry averages of 11.15% and 5.12%. Likewise, the stock’s trailing-12-month ROCE of 22.39% is 241.2% higher than the industry average of 6.56%.
For the six months that ended December 31, 2023, DRD’s revenue grew 12% year-over-year to R2.97 billion ($155.12 million). The company’s gross profit from operating activities of R762.50 million ($39.77 million) indicates growth of 14% from the prior year’s period. Its profit for the period came in at R589.30 million ($30.73 million), up 10% year-over-year.
Furthermore, the company’s total assets stood at R8.29 billion ($432.63 million) as of December 31, 2023, compared to total assets of R7.27 billion ($379.40 million) as of December 31, 2022.
Analysts expect DRD’s revenue for the fiscal year 2024 to grow 8.4% year-over-year to $317.25 million, and its EPS is expected to be $0.67 for the same period, respectively. Moreover, the stock has surged 4.6% over the past three months to close the last trading session at $7.82.
DRD’s bright prospects are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
DRD has a B grade for Value. It is ranked #12 out of 42 stocks in the Miners - Gold industry.
To check other POWR Ratings of DRD for Quality, Growth Momentum, Stability, and Sentiment, click here.
Stock #2: Harmony Gold Mining Company Limited (HMY)
Based in Randfontein, South Africa, HMY engages in the exploration, extraction, and processing of gold. It explores uranium, silver, copper, and molybdenum deposits. The company has eight underground operations in the Witwatersrand Basin, an open-pit mine on the Kraaipan Greenstone Belt, and various surface source operations in South Africa.
HMY’s trailing-12-month gross profit margin and EBIT margin of 34.14% and 21.29% are 17.8% and 91% higher than the respective industry averages of 28.98% and 11.15%. Further, the stock’s trailing-12-month net income margin of 15.50% is favorably compared to the 5.12% industry average.
On March 25, HMY announced Queensland Government’s declaration of the Eva Copper Mine Project as a ‘Prescribed Project’, in recognition of its social and economic significance to the state’s Northwest region. This will harness coordination of approval processes required for the project and benefit the company significantly.
During the six months that ended December 31, 2023, HMY’s revenue increased 35.1% year-over-year to R31.41 billion ($1.64 billion). The company's gross profit grew 186.2% from the prior year’s period to R8.62 billion ($449.67 million). Its operating profit of R 7.57 billion ($394.75 million) indicates growth of 184.4% year-over-year.
In addition, the company’s net profit for the period and EPS came in at R5.96 billion ($310.84 million) and R9.53, up 220.2% and 220.9% from the previous year’s period. Its EBITDA increased 114% year-over-year to R17.43 billion ($909.15 million).
Analysts expect HMY’s revenue for the fiscal year (ending June 2024) to increase 21.8% year-over-year to $3.21 billion, while its EPS is expected to grow 106.8% year-over-year to $0.91, respectively.
Shares of HMY have gained 83.2% over the past six months and 94.2% over the past year to close the last trading session at $8.74.
HMY’s POWR Ratings reflect its robust outlook. The stock has an overall rating of B, translating to a Buy in our proprietary rating system.
HMY has an A grade for Growth. It also has a B grade for Quality and Value. It is ranked #6 among 42 stocks within the same industry.
To see the other ratings of HMY for Sentiment, Momentum, and Stability, click here.
Stock #1: Centamin plc (CELTF)
Headquartered in Saint Helier, Jersey, CELTF engages in the exploration, mining, and development of precious metals in Egypt, Burkina Faso, Côte d’Ivoire, Jersey, the United Kingdom, and Australia. Its principal asset is the Sukari Gold Mine project, which covers an area of about 160 square km in the Eastern Desert of Egypt.
CELTF’s trailing-12-month EBIT margin of 22.23% is 99.4% higher than the industry average of 11.15%. Likewise, the stock’s trailing-12-month levered FCF margin of 9.47% is 77.9% higher than the industry average of 5.32%.
On January 9, 2024, CELTF announced encouraging results of its maiden drill program on the company’s Eastern Desert Exploration (EDX) landholding in Egypt and updated the anticipated exploration program in 2024.
CELTF's EDX blocks consist of 3,000km of greenfield exploration tenements within Egypt's Nubian Shield - a highly prospective geological belt that has not been explored using modern exploration methods. Further, its 2024 work program includes delineating potential resources and further drill targets in Egypt as part of the growth strategy.
CELTF reported gold production of 104,821 oz and gold sold of 92,494 oz during the first quarter that ended March 31, 2024. The company posted revenue of $190.98 million, and its free cash flow came in at $10.34 million for the quarter. As of March 31, 2024, its cash on hand and total cash and liquid assets were $103 million and $167 million, respectively.
As per business guidance for the fiscal year 2024, CELTF's gold production is expected to range between 470,000 to 500,000 oz per annum, weighted towards H2.
Street expects CELTF’s revenue for the fiscal year (ending December 2024) to increase 13.1% year-over-year to $1.01 billion. Similarly, for the fiscal year 2025, the company’s revenue is expected to grow 4.2% year-over-year to $1.05 billion.
CELTF’s stock has gained 56.2% over the past six months and 19.2% over the past year to close the last trading session at $1.56.
CELTF’s sound fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
The stock has a B grade for Value, Quality, and Stability. Within the Miners - Gold industry, CELTF is ranked #4 among the 42 stocks.
Click here to access additional ratings of CELTF for Growth, Momentum, and Sentiment. Top of Form
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
HMY shares were trading at $8.71 per share on Thursday morning, down $0.03 (-0.34%). Year-to-date, HMY has gained 42.62%, versus a 5.15% rise in the benchmark S&P 500 index during the same period.
About the Author: Rjkumari Saxena
Rajkumari started her career as a writer but gradually shifted her focus to financial journalism, leveraging her educational background in Commerce. Fascinated by the interplay of business and economic shifts in equities, she aspires to evolve as an analyst. With a knack for simplifying complex financial concepts, her mission is to empower investors with insights that lead to profitable decisions.
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