We've been asking ourselves recently if the market has placed a fair valuation on Newmont. Let's dive into some of the fundamental values of this large-cap Basic Materials company to determine if there might be an opportunity here for value-minded investors.
A Lower P/B Ratio Than Its Sector Average but Trades Above Its Graham Number:
Newmont Corporation engages in the production and exploration of gold. The company belongs to the Basic Materials sector, which has an average price to earnings (P/E) ratio of 10.03 and an average price to book (P/B) ratio of 2.08. In contrast, Newmont has a trailing 12 month P/E ratio of -57.2 and a P/B ratio of 1.65.
Newmont has moved -9.0% over the last year compared to 8.0% for the S&P 500 — a difference of -17.0%. Newmont has a 52 week high of $55.41 and a 52 week low of $37.45.
Increasing Revenues but Narrowing Margins:
| 2021-02-18 | 2022-02-24 | 2023-02-23 | |
|---|---|---|---|
| Revenue (MM) | $11,497 | $12,222 | $11,915 |
| Gross Margins | 56.4% | 55.5% | 45.7% |
| Operating Margins | 28.2% | 16.3% | 13.5% |
| Net Margins | 24.61% | 9.54% | -3.6% |
| Net Income (MM) | $2,829 | $1,166 | -$429 |
| Net Interest Expense (MM) | -$308 | -$274 | -$227 |
| Depreciation & Amort. (MM) | -$2,300 | -$2,323 | -$2,185 |
| Earnings Per Share | $3.51 | $1.46 | -$0.7 |
| EPS Growth | n/a | -58.4% | -147.95% |
| Diluted Shares (MM) | 806 | 800 | 795 |
| Free Cash Flow (MM) | $6,184 | $5,932 | $5,351 |
| Capital Expenditures (MM) | -$1,302 | -$1,653 | -$2,131 |
| Net Current Assets (MM) | -$8,985 | -$11,007 | -$12,434 |
| Current Ratio | 2.52 | 2.9 | 2.23 |
| Long Term Debt (MM) | $7,038 | $6,475 | $6,399 |
| Net Debt / EBITDA | 0.46 | 0.63 | 2.37 |
Newmont has stable revenues and increasing reinvestment in the business, a steady stream of strong cash flows, and an excellent current ratio. The company also benefits from wider gross margins than its peer group, decent operating margins with a negative growth trend, and healthy leverage. However, the firm has declining EPS growth.
