Although inflation has eased significantly over the past few months, it remains above the Federal Reserve’s 2% target. The April Consumer Price Index (CPI) data is expected to show that consumer prices remained elevated last month. Moreover, the Fed economists have predicted a mild recession later this year.
With fears of a recession rising, investors must look for ways to protect their portfolios. One of the ways to do so is by investing in gold. Gold is seen as a safe investment during times of economic uncertainty. Therefore, I believe it would be wise to invest in gold stocks B2Gold Corp. (BTG), Centamin plc (CELTF), and Dundee Precious Metals Inc. (DPMLF).
Before diving deeper into the fundamentals of these stocks, let’s discuss why investing in gold stocks could be wise now.
After announcing its tenth interest rate hike of 25 basis points last week, the Fed signaled it could pause rate hikes, but it would assess incoming macroeconomic data ahead of its next meeting in June. According to estimates, April’s CPI could rise 5% year-over-year, matching March’s annual gain. On a sequential basis, consumer prices are expected to have risen 0.4% in April, up from the 0.1% increase in March.
Moreover, the job market remained strong as the U.S. economy added 253,000 nonfarm payroll jobs last month compared to expectations of 185,000. This spate of strong macroeconomic data could prompt the Fed to consider hiking again in June. This would further solidify the Fed staff’s expectations of a mild recession later this year, keeping investors jittery.
When investors become nervous about the economy, they may move their money from riskier assets like equity and cryptocurrency to safe assets like gold, which is considered a relatively stable and secure investment. While owning physical gold can be expensive and complicated, buying gold stocks could expose investors to gold without actually owning it.
Gold enjoys consistent demand worldwide, and a recession in any region of the world is unlikely to hamper its international prices.
As gold demand increases, gold prices typically rise, which is favorable for gold mining companies. Moreover, gold mining companies may benefit from lower oil prices during a recession. Energy costs are a major expense for gold miners, and when oil prices are lower, their operational costs fall, leading to an increase in their margins.
Let’s discuss the fundamentals of the featured stocks.
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 April 19, 2023, BTG announced that it had completed the previously announced plan to acquire Sabina Gold & Silver Corp. BTG’s President and CEO Clive Johnson said, “The closing of the acquisition of Sabina and the Back River Gold District represents a milestone for B2Gold as we continue to build a low-cost responsible senior gold mining company.”
“We are excited to add such a high-quality, high-grade gold project in a top mining jurisdiction to our global portfolio, and we are thrilled to welcome the exceptional Sabina team into B2Gold,” he added.
In terms of the trailing-12-month gross profit margin, BTG’s 57.03% is 101.6% higher than the 28.29% industry average. Likewise, its 52.92% trailing-12-month EBITDA margin is 193.7% higher than the industry average of 18.02%. Furthermore, the stock’s 22.06% trailing-12-month Capex/Sales is 260.8% higher than the industry average of 6.11%.
BTG’s gold revenue increased 29.5% year-over-year to $473.56 million for the first quarter ended March 31, 2023. Its gross profit increased 53% over the prior-year quarter to $213.63 million. The operating income increased 49% year-over-year to $175.92 million. Its net income for the period rose 12.2% over the prior-year quarter to $101.90 million. In addition, its EPS remained flat year-over-year at $0.08.
Analysts expect BTG’s EPS and revenue for the quarter ending June 30, 2023, to increase 61.3% and 19.6% year-over-year to $0.06 and $456.66 million, respectively. Over the past six months, the stock has gained 27.1% to close the last trading session at $4.17.
BTG’s POWR Ratings reflect this positive outlook. BTG has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It is ranked #7 out of 39 stocks in the B-rated Miners – Gold industry. It has an A grade for Quality and a B for Value. Click here to see the other ratings of Growth, 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.
In terms of the trailing-12-month EBITDA margin, CELTF’s 39.46% is 119% higher than the 18.02% industry average. Likewise, its 9.19% trailing-12-month net income margin is 26.7% higher than the industry average of 7.25%. Furthermore, the stock’s 34.98% trailing-12-month Capex/Sales is 472.1% higher than the industry average of 6.11%.
For the first quarter ended March 31, 2023, CELTF’s revenue increased 18% year-over-year to $205.20 million. Its free cash flow rose 138% over the prior-year quarter to $8.10 million. The company’s realized gold price increased marginally year-over-year to $1,902/oz. Also, its gold sold increased 16% year-over-year to 107,661 oz.
For the quarter ending June 30, 2023, CELTF’s revenue is expected to increase 1% year-over-year to $209.30 million. Over the past year, the stock has gained 29.4% to close the last trading session at $1.41.
CELTF’s POWR Ratings reflect solid prospects. It has an overall rating of B, which translates to Buy in our proprietary rating system.
It has a B grade for Value, Stability, and Quality. It is ranked #3 in the same industry. To see the other ratings of CELTF for 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 exploration, development, mining, and processing of precious metals. It owns and operates a gold, copper, and silver mine located east of Sofia, Bulgaria, a gold mine located in southeastern Bulgaria, and a custom smelter in Namibia.
On March 30, 2023, DPMLF announced that it extended the mine life of the Chelopech Mine in Bulgaria to 2031. DPMLF’s President and CEO David Rae said, “With mining now expected to extend into 2031, a strong mineral resource base, and increased in-mine and brownfield exploration drilling, we believe there is strong potential for this trend to continue at Chelopech.”
In terms of the trailing-12-month levered FCF margin, DPMLF’s 20.72% is 486.2% higher than the 3.54% industry average. Likewise, its 9.74% trailing-12-month net income margin is 34.3% higher than the industry average of 7.25%. Furthermore, the stock’s 14.56% trailing-12-month Capex/Sales is 138.1% higher than the industry average of 6.11%.
DPMLF’s revenue for the first quarter ended March 31, 2023, increased 1.3% year-over-year to $155.83 million. Its costs and expenses declined 10.9% year-over-year to $106.84 million. The company’s net earnings increased 73.7% year-over-year to $46.60 million. In addition, its EPS came in at $0.24, representing an increase of 71.4% year-over-year.
Analysts expect DPMLF’s revenue for the quarter ending June 30, 2023, to increase 39.1% year-over-year to $187.03 million. The stock has gained 66.7% year-to-date to close the last trading session at $7.95.
DPMLF’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of A, which translates to Strong Buy in our proprietary rating system.
It has an A grade for Stability and Quality and a B for Growth and Value. It is ranked #2 in the Miners – Gold industry. Click here to see the other ratings of DPMLF for Momentum and Sentiment.
The Bear Market is NOT Over…
That is why you need to discover this timely presentation with a trading plan and top picks from 40 year investment veteran Steve Reitmeister:
REVISED: 2023 Stock Market Outlook >
BTG shares rose $0.06 (+1.44%) in premarket trading Wednesday. Year-to-date, BTG has gained 20.14%, versus a 8.79% rise in the benchmark S&P 500 index during the same period.
About the Author: Dipanjan Banchur
Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets.
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