Is Newmont Stock Still a Screaming Buy as Prices Surge?
Recent Performance Overview
Newmont Corporation has seen its stock price soar by approximately **33.6% over the past six months**, significantly outperforming the broader Mining – Gold industry, which has risen **only 16.6%** in the same timeframe. This robust performance is largely a result of the surge in gold prices driven by recent monetary policy easing and escalating geopolitical tensions. Currently, Newmont’s stock (NEM) is trading **roughly 6% below its 52-week high** of $56.30, which was reached on September 25, 2024.
Technical indicators reveal a bullish trend for NEM as the stock has remained above its **50-day simple moving average (SMA)** since early July. Notably, a ‘golden crossover’ on May 13, 2024, where the 50-day SMA crossed above the 200-day SMA, signifies strengthened momentum, essentially marking a period of upward price action.
Exploring Key Growth Catalysts
Investors looking at Newmont should consider the **strategic growth projects** that are shaping the company’s future performance. Key initiatives such as the **Tanami Expansion 2** in Australia, the **Ahafo North expansion** in Ghana, and the **Cadia Block Caves** in Australia are poised to enhance production capacity and extend the life of significant mining assets, likely driving future revenue growth.
Moreover, Newmont’s acquisition of **Newcrest Mining Limited** has resulted in a superior portfolio that supports a multi-decade gold and copper production profile in some of the most favorable mining jurisdictions. This merger is expected to provide shareholders with substantial value and **synergies**, with anticipated **annual pre-tax benefits of $500 million** by the end of 2025.
Strong Financial Health Underpins Growth
A critical factor for any investor is the company’s financial health. Newmont boasts a solid liquidity position, with **$6.8 billion** in total liquidity, including **$2.6 billion** in cash and cash equivalents at the end of Q2 2024. Remarkably, operating cash flow doubled year-over-year to approximately **$1.4 billion**, signaling robust cash generation capacity.
The company also produced **$594 million** in free cash flow in that quarter, returning about **$539 million** to shareholders through dividends and share buybacks. NEM currently offers a **dividend yield of 1.9%**, and a payout ratio of **47%**, well below the threshold that indicates a sustainable dividend. Additionally, the dividend has demonstrated a **five-year annualized growth rate of 6.8%**, providing confidence in its reliability.
Favorable Market Conditions and Earnings Trajectory
Newmont is poised to reap the benefits of the **record-high gold prices**, which are expected to spur profitability and enhance cash flow generation. Gold prices have recently surged due in part to a **50-basis-point cut** in interest rates by the Federal Reserve, reaching an impressive **$2,685.42 per ounce** on September 26, 2024. Coupled with mounting tensions in the Middle East, this scenario has led to elevated safe-haven demand for gold.
Moreover, earnings estimates for NEM have seen a positive trend over the past two months, with analysts increasingly optimistic about future growth. The consensus estimate for **2024 earnings stands at $3.00**, indicating an impressive year-over-year growth of **86.3%**, while earnings in **2025 are expected to grow by approximately 18.4%**. Compared to the industry average, NEM’s long-term EPS growth trajectory of **39.3%** significantly outpaces the industry’s **25.5%**.
Valuation Considerations
Newmont’s stock is currently trading at a **forward price-to-earnings (P/E) ratio of 15.46**, a slight premium to the industry average of **15.03**. While this suggests that NEM’s shares might be a bit stretched, the valuation appears reasonable considering the strong earnings growth trajectory.
Over the past year, NEM’s shares have returned **40.8%**, underperforming compared to the industry’s **45.9% rise** but outpacing the broader **S&P 500**, which has increased by **32.4%**. This performance still stands tall alongside notable competitors such as **Barrick Gold** and **Agnico Eagle Mines**, reflecting a solid position within the market.
Final Thoughts: Is NEM Still Worth Buying?
The investment case for Newmont remains robust, driven by a blend of key growth projects, strong financial health, and a favorable technical outlook. Rising earnings estimates, an attractive dividend yield, and the rallying gold prices further bolster the attractiveness of this stock. With a positive long-term outlook supported by the merger with Newcrest, Newmont is well-poised to deliver attractive returns for serious investors looking to capitalize on the ongoing gold rush. Thus, NEM deserves close attention as a strong candidate for portfolio inclusion.
