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.
Newmont Has an Attractive P/B Ratio but a Worrisome P/E Ratio:
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 -34.3 and a P/B ratio of 1.51.
Newmont has moved -18.0% over the last year compared to 15.0% for the S&P 500 — a difference of -33.0%. Newmont has a 52 week high of $55.41 and a 52 week low of $33.59.
The Company May Be Profitable, but Its Balance Sheet Is Highly Leveraged:
| 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | |
|---|---|---|---|---|---|---|
| Revenue (MM) | $7,253 | $9,740 | $11,497 | $12,222 | $11,915 | $11,196 |
| Gross Margins | 11% | 13% | 24% | 10% | 2% | -2% |
| Operating Margins | 10.0% | 38.0% | 27.0% | 9.0% | 0.0% | -2.0% |
| Net Margins | 5.0% | 30.0% | 25.0% | 10.0% | 1.0% | 0.0% |
| Net Income (MM) | $381 | $2,956 | $2,829 | $1,166 | $60 | $38 |
| Net Interest Expense (MM) | $188 | $2,416 | $337 | -$87 | -$62 | $204 |
| Depreciation & Amort. (MM) | $1,215 | $1,960 | $2,300 | $2,323 | $2,185 | $2,026 |
| Earnings Per Share | $0.64 | $3.81 | $3.51 | $1.46 | -$0.54 | -$0.96 |
| Diluted Shares (MM) | 535 | 737 | 806 | 801 | 795 | 796 |
| Free Cash Flow (MM) | $805 | $1,413 | $3,588 | $2,626 | $1,089 | $310 |
| Capital Expenditures (MM) | $1,032 | $1,463 | $1,302 | $1,653 | $2,131 | $2,317 |
| Net Current Assets (MM) | -$3,926 | -$11,285 | -$8,985 | -$11,007 | -$12,434 | -$12,584 |
| Long Term Debt (MM) | $6,195 | $10,922 | $11,119 | $13,032 | $13,417 | $13,959 |
| Net Debt / EBITDA | 1.72 | 1.58 | 1.04 | 2.34 | 4.91 | 6.22 |
Newmont's financial statements include several red flags such as slimmer gross margins than its peers, declining EPS growth, and a deteriorating pattern of cash flows. Additionally, the firm has a highly leveraged balance sheet. On the other hand, the company benefits from growing revenues and increasing reinvestment in the business and decent operating margins with a negative growth trend.
