Mitigating inflation data has raised the likelihood of a rate hike halt. However, robust jobs data and the prospects of inflation achieving the Fed's 2% target in the foreseeable future appearing narrow have prompted officials to keep the option of executing additional rate increases on the table.
Traditionally, gold is commended for its consistent stability and propensity to maintain long-term value, especially during financial turbulence. Hence, fundamentally strong gold stocks B2Gold Corp. (BTG), Centamin plc (CELTF), and Dundee Precious Metals Inc. (DPMLF) could be wise portfolio additions now.
In July, the Consumer Price Index (CPI) rose 3.2% year-over-year, while the core CPI witnessed a 4.7% year-over-year upswing, lower than June's 4.8%. Both indices recorded a 0.2% monthly acceleration.
Despite recessionary anxieties being alleviated due to the inflow of favorable data, the easing inflation might not be significant enough to prompt an interest rate reduction, as it still considerably overshoots the Fed's preferred 2% threshold.
Policymakers have maintained a resistant stance against interest rate cut predictions. Chatham House’s senior adviser and Goldman Sachs Asset Management’s former chair, O’Neill, echoed this sentiment, agreeing that a rate reduction is probably some distance off.
The confluence of increasing wages, robust retail sales data, and lingering inflation suggest that market volatility is unlikely to dissipate anytime soon.
Investors often regard secure assets, like gold, as a safe haven due to their inherent hedge attributes. For centuries, gold has been an ultimate choice for wealth accumulation and preservation, viewed as a comparatively low-risk investment that tends to appreciate over time.
Gold demonstrated promising performance in 2023, rising by approximately 5% and maintaining a stable value within the $1,900 to $2,000 range. By July 2023, gold showcased a 3.1% increase, reaching $1,971, elevating the year-to-date return to 8.7%. Furthermore, a weaker U.S. dollar contributed positively, adding a 1.2% uptick to gold's monthly return.
However, despite gold prices declining from the $2000 per ounce mark, analysts predict a potential ascent in yellow-metal prices later in the year and early into 2024. The optimism is backed by the belief that the U.S. interest rate hike cycle might soon conclude, potentially driving up the precious metal value by around 20% to $2,300 an ounce.
The SPDR Gold Shares (GLD) have gained 6.6% over the past year and 3.3% over the past six months, substantiating investors’ interest in gold.
Therefore, quality gold stocks BTG, CELTF, and DPMLF could be wise portfolio additions now.
B2Gold Corp. (BTG)
Headquartered in Vancouver, Canada, BTG is a gold producer with three mines in Mali, the Philippines, and Namibia. It operates the Fekola mine in Mali, the Masbate mine in the Philippines, and the Otjikoto mine in Namibia. The company has a 25% interest in Calibre Mining Corp.; and approximately 19% interest in BeMetals Corp.
On June 27, BTG paid its shareholders a quarterly dividend of $0.04 per common share. The company’s annual dividend of $0.16 translates to a yield of 5.23% at the current price level, while its four-year average dividend yield is 2.81%. Also, its dividend payout has grown at a CAGR of 62.2% over the past three years.
On April 19, BTG announced the acquisition of all outstanding common shares of Sabina Gold & Silver Corp. This strategic acquisition grants BTG the ownership of Sabina’s Back River Gold District in Nunavut, Canada.
The successful completion of the Sabina deal and the procurement of the Back River Gold District mark substantial progress in BTG's endeavor to form an economically sound and socially conscious senior gold mining enterprise. BTG is also focused on augmenting its global portfolio with a top-tier, high-quality gold project with abundant-grade reserves.
BTG’s revenue has grown at CAGRs of 10.1% and 17.3% over the past three and five years, respectively. Likewise, its total assets have improved at a CAGR of 14.9% over the past three years.
BTG’s trailing-12-month gross profit margin of 60.49% is 118.6% higher than the 27.67% industry average. Likewise, its trailing-12-month EBIT and levered FCF margin of 32.02% and 25.42% are 185.2% and 543.5% higher than the industry averages of 11.23% and 3.95%, respectively.
For the fiscal second quarter that ended June 30, 2023, BTG’s gold revenue increased 23.3% year-over-year to $470.85 million, while its gross profit grew 61.4% from the year-ago value to $190.32 million. Its operating income improved 62.7% from the year-ago value to $159.14 million.
The company’s adjusted net income and adjusted earnings per share rose 89.6% and 75% year-over-year to $85.80 million and $0.07, respectively.
The consensus revenue and EPS estimates of $478.61 million and $0.07 for the third quarter (ending September 30, 2023) reflect 21.9% and 145.3% year-over-year improvements, respectively.
The stock has gained marginally over the past five days to close the last trading session at $3.04.
BTG’s POWR Ratings reflect this positive outlook. BTG has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It is ranked #3 within the 40-stock B-rated Miners – Gold industry. It has a B grade for Growth, Value, and Quality.
Click here to see the other ratings of Momentum, Stability, and Sentiment.
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. It explores gold deposits, and its principal asset is the Sukari Gold Mine project, which covers an area of approximately 160 square kilometers located in the Eastern Desert of Egypt.
On July 26, CELTF declared an interim dividend of $0.02 per share, payable to its shareholders on September 29, 2023. The company’s annual dividend of $0.04 translates to a yield of 3.81% at the current price level, while its four-year average dividend yield is 5.78%.
Its revenue has grown at a CAGR of 4.1% over the past five years, while its total assets have improved at 3% and 2.6% CAGRs over the past three and five years, respectively.
CELTF’s trailing-12-month gross profit margin of 33.36% is 20.6% higher than the 27.67% industry average. Likewise, its trailing-12-month EBIT margin of 23.20% is 106.7% higher than the industry average of 11.23%.
During the six months that ended June 30, 2023, CELTF’s revenue increased 11.5% year-over-year to $425.61 million, while its gross profit grew 26.9% from the year-ago value to $157.81 million.
The company’s attributable profit for the period after tax and earnings per share amounted to $90.97 million and $7.73, up 7.4% and 6.2% year-over-year, respectively. Also, its adjusted EBITDA rose 26% from the year-ago value to $192.93 million.
For the fiscal year ending December 2023, CELTF’s revenue is expected to increase 11.9% year-over-year to $881.96 million.
Over the past year, the stock has gained 3.7% to close the last trading session at $1.13.
CELTF’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of A, which equates to a Strong Buy in our proprietary rating system.
It has a B grade for Value, Stability, and Quality. Within the same industry, it is ranked #5.
To see the other ratings of CELTF (Growth, Momentum, and Sentiment), click here.
Dundee Precious Metals Inc. (DPMLF)
Based in Toronto, Canada, DPMLF is a gold mining company that engages in acquiring mineral properties; and exploring, developing, mining, and processing precious metals. It owns and operates a gold, copper, and silver mine located east of Sofia, Bulgaria, and a gold mine in southeastern Bulgaria.
On August 1, DPMLF declared a quarterly dividend of $0.04 per common share, payable to its shareholders on October 16. The company’s annual dividend of $0.16 per share translates to a yield of 2.56% at the current price level, while its four-year average dividend yield is 1.55%. Additionally, its dividend payouts have grown at a CAGR of 58.7% over the past three years.
Over the past three years, DPMLF’s revenue and net income have grown at CAGRs of 5.1% and 115.7%, respectively. Likewise, its total assets grew at CAGRs of 13.6% and 7.3% over the past three and five years, respectively.
DPMLF’s trailing-12-month gross profit margin of 41.93% is 51.6% higher than the 27.67% industry average. Likewise, its trailing-12-month EBIT margin of 29.28% is 160.8% higher than the industry average of 11.23%.
DPMLF’s total revenue for the fiscal second quarter that ended June 30, 2023, increased 24.6% year-over-year to $167.52 million, while its adjusted EBITDA came in at $86.65 million, up 26.2% from the year-ago value.
The company’s adjusted net earnings and adjusted net earnings per share grew 87% and 94.1% year-over-year to $62.20 million and $0.33, respectively. Furthermore, its free cash flow rose 71% from the prior-year quarter to $70.45 million.
Analysts expect DPMLF’s revenue for the fiscal third quarter ending September 2023 to increase 33.1% year-over-year to $171.20 million, while the company’s revenue for the fiscal year ending December 2023 is projected to increase 17.4% year-over-year to $668.78 million.
Over the past year, DPMLF’s shares have gained 18.5% to close the last trading session at $6.08. The stock gained 27.5% year-to-date.
It’s no surprise that DPMLF has an overall rating of A, which equates to a Strong Buy in our proprietary rating system.
It has an A grade for Stability and Quality and a B for Growth and Value. Within the same industry, it is ranked #2.
In addition to the POWR Ratings we’ve stated above, we have also mentioned DPMLF’s ratings for Momentum and Sentiment. Get all DPMLF ratings here.
What To Do Next?
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BTG shares rose $0.02 (+0.66%) in premarket trading Wednesday. Year-to-date, BTG has declined -12.33%, versus a 16.60% rise in the benchmark S&P 500 index during the same period.
About the Author: Sristi Suman Jayaswal
The stock market dynamics sparked Sristi's interest during her school days, which led her to become a financial journalist. Investing in undervalued stocks with solid long-term growth prospects is her preferred strategy. Having earned a master's degree in Accounting and Finance, Sristi hopes to deepen her investment research experience and better guide investors.
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