NEM

A Short Intro for Newmont Investors

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.

The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.

ON FOCUS