Barrick Gold Corporation - Value

Investors can still find value amongst the gold stocks, even as shares have surged in 2010. Barrick Gold Corporation (ABX) is trading at just 11.9x forward estimates and is expected to report double digit earnings growth in both 2010 and 2011.

Barrick is one of the largest gold mining companies in the world. The Toronto-based company has 25 operations on 5 continents mining gold, silver and copper. Gold, however, is its main business.

Records Fall in the Third Quarter

On Oct 28, Barrick reported third quarter results and surprised on the Zacks Consensus for the 7th straight quarter. The company has put together a nice earnings surprise track record during the global economic recovery.

Earnings per share were 83 cents compared to the Zacks Consensus of 75 cents for a 10.7% beat.

Third quarter production was slightly ahead of the plan at 2.06 million ounces of gold. It saw lower than expected total cash costs of $454 per ounce or net cash costs of $349 per ounce.

The company is unhedged and realized gold prices of $1,237 per ounce which was 27% higher than a year ago.

Records were set in the quarter, including a new record on operating cash flow at $1.28 billion, up 40% from $911 million in the prior year's quarter. The company set a record for the first three quarters of 2010, generating $3.3 billion in operating cash flow.

Barrick also has a strong cash position with $4.3 billion in cash balance at the end of the third quarter and $1.5 billion in undrawn credit.

Barrick Is Sharing the Wealth

The company paid 12 cents per share to shareholders on Dec 15, which was a 20% increase from the previous dividend on an annualized basis.

The current dividend yield is 1.0%, which is much higher than the gold mining industry which pays on average, no dividend at all.

Zacks Consensus Estimates Rise in the Last Week

Analysts are still bullish on the company as gold prices hover near all-time highs. 1 estimate for 2010 was revised higher in just the last week as the Zacks Consensus Estimate rose a penny to $3.19 from $3.18 per share.

That is earnings growth of 67.7%.

While growth is expected to slow in 2011, the 2011 Zacks Consensus has also moved higher by a penny in the last week to $3.96 per share. That is earnings growth of 24.2%.

Barrick is expected to report fourth quarter results on Feb 17.

Barrick Has Attractive Value Characteristics

With shares down 8.8% in the last 4 weeks, Barrick's stock is even more of a value.

In addition to its low P/E, Barrick also has a value price-to-book ratio of 2.6. This is under some others in its industry such as Anglogold (AU) with a P/B ratio of 4.5 and Eldorado Gold (EGO) with a P/B of 3.4.

With the expected growth and the low P/E, Barrick is both a growth and a value stock with a PEG ratio of just 0.5. Eldorado Gold, by comparison, has a PEG ratio of 5.2.

The company also has an excellent return on equity (ROE) of 16.6%, well above its peers' average at 6.8%.

Barrick is a Zacks #1 Rank (strong buy) stock.

Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor in charge of the market-beating Zacks Value Trader service. You can follow her at twitter.com/traceyryniec.

 
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