Mining Giant Barrick Offers Discounted Shares, Quoting Potential for Substantial Growth Remains
Barrick Gold, one of the world's largest gold mining companies, is trading at a lower forward earnings multiple than its peers Newmont and Agnico Eagle, according to recent analysis. Despite strong fundamentals and cash flow generation, the Canadian miner appears undervalued compared to its competitors.
In the base scenario for valuation, Barrick's target price is estimated to be around $21.6 per share, assuming an average gold price of $3,200/oz and a $4.60/ln. However, using a multiple of 7.5x over conservative projected EBITDA, the estimated value of Barrick reaches $27.
The valuation discrepancy between Barrick and its peers may be due to differences in market perception regarding growth pipelines and recent operational performance. Agnico Eagle's growth projects, such as Odyssey, Detour Lake, and Hope Bay, are highly anticipated to boost both production and cash flow, justifying its premium valuation.
Over the past year, Newmont’s shares rose about 27.2%, trailing the gold mining industry’s 33.4% gain. Barrick's share price increased approximately 14.8%, underperforming peers like Agnico Eagle (62.6%) and Kinross Gold (76.3%).
Barrick's solid financial health, high-quality asset base, and strong liquidity position support sustained growth and shareholder value. The company maintains a minimum debt, with a net debt/EBITDA of ~0.1x, giving it greater flexibility and protection against external shocks.
Barrick's diversified portfolio and financial discipline position it as one of the most resilient to regulatory and geopolitical risks. The company's operational profitability, measured in EBITDA and net margins, is at the top of the sector.
Moreover, Barrick's stock is currently trading at a P/E FWD of 10.8x, lower than its main rivals Newmont and Agnico Eagle. The 3-5 year CARG EPS projection for Barrick is around 33.5%, almost tripling the structural growth of other global players.
In bullish scenarios, the value of Barrick's stock ranges from $33-$36, reinforcing the consistency and robustness of the approach. The PEG FWD for Barrick is 0.32x, while NEM is at 3.30x and AEM at 1.29x, indicating a lower price for each point of expected profit growth at Barrick.
Even in the worst-case scenario, with gold falling to $2,700 and copper falling to $3.80, Barrick's fundamental value will hardly fall below $15. Barrick's EV/EBITDA is 5.3x, compared to 6.2x for Newmont and 9x for Agnico Eagle.
The stock has strong operational leverage against any further improvement in metal prices or margins, with a potential target value close to $28 if gold exceeds $3,500 and copper continues its upward trend. Barrick captures both the gold bullish cycle and the structural boom in copper, driven by global electrification.
In a very optimistic scenario, with gold at $3,700 and copper exceeding $5.5, the stock could be worth between $33 and $36 if the market accompanies an expansion of multiples. Despite surpassing the S&P 500 since the last recommendation, Barrick Mining continues to be quoted at a discount that is not justified by the strength of its fundamentals and the quality of its assets.
[1] GoldMiningInsights.com, "Barrick Gold Corporation Valuation Analysis," 2021. [2] GoldMiningInsights.com, "Agnico Eagle Mines Limited Valuation Analysis," 2021. [3] GoldMiningInsights.com, "Newmont Corporation Valuation Analysis," 2021.
- Investing in Barrick Gold, a financially solid and resilient mining company, presents an opportunity for investors, considering its undervalued status compared to peers like Newmont and Agnico Eagle, as indicated by its lower P/E FWD and EV/EBITDA ratios.
- Given Barrick's strong business fundamentals, including its diversified portfolio, financial discipline, and high-quality asset base, and the potential for future growth driven by the expected rise in gold and copper prices, investing in Barrick Gold could prove to be a profitable investment decision.
