Kinross Gold Corporation (KGC) acquires, develops, and explores gold properties in the United States, the Russian Federation, and Brazil. Based in Toronto, Canada, the company extracts and processes gold-containing ores and produces and sells silver. In comparison, B2Gold Corp. (BTG), which is based in Vancouver, Canada, is a gold producer that operates primarily with three mines. The company operates the Fekola Mine in Mali, the Masbate Mine in the Philippines, and Otjikoto Mine in Namibia.
After a sharp correction in its last session, gold prices are again up on Thursday, bouncing above the $2,000 per ounce level as a lack of progress in talks between Russia and Ukraine led investors to seek safe-haven assets again. After declining 3% in its last session on Wednesday, spot gold prices have again jumped 0.7% to $2,004.89 per ounce, while United States gold futures were up 1.2% to $2,011.00 per ounce. Given the current geopolitical uncertainty, investment bank Goldman Sachs Group Inc. (GS) has raised its three-month horizon gold price projection to $2,300 per ounce, from $1,950 per ounce. It moved its six-month projection to $2,500 per ounce, from $2,050 per ounce previously. Both KGC and BTG are well-positioned players in the gold mining industry and might benefit from gold price increases.
KGC’s stock has declined 3.4% in price year-to-date and 4.3% over the past six months but has gained 6.5% over the past three months. In comparison, BTG’s stock has gained 14% year-to-date, 19.8% over the past six months, and 20.1% over the past three months.
Click here to check out our Gold and Silver Industry Report for 2022
But which stock is a better buy now? Let’s find out.
Latest Developments
On March 9, KGC announced that its La Coipa project in Chile had achieved the significant milestone of pouring its first gold bar. The project is expected to reach full operational capacity mid-year. The company also signed a power purchase agreement last year to supply La Coipa with 100% renewable power, which aligns with its greenhouse gas emissions reduction strategy.
On February 2, BTG announced that the Government of Mali had granted BTG’s Malian subsidiary a new exploration permit that covers the same perimeter as the Menankoto permit. Exploration was expected to commence by February 15, with two drill rigs and additional drill rigs to be deployed shortly thereafter. This might add to the company’s operative capability.
Recent Financial Results
For its fiscal fourth quarter, ended December 31, BTG’s gold revenue increased 9.7% year-over-year to $526.11 million. Its cash provided by operating activities rose 35.4% from the prior-year quarter to $266.29 million. And its net income and EPS stood at $153.14 million and $0.13, respectively.
KGC’s metal sales decreased 26.4% year-over-year to $879.50 million in its fiscal fourth quarter, ended December 31. Its net cash flow provided from operating activities declined 71% from the prior-year period to $197.30 million. And its net earnings attributable to common shareholders came in at a negative $2.70 million.
Past and Expected Financial Performance
BTG’s revenue and EBITDA have grown at CAGRs of 18.8% and 25%, respectively, over the past three years. Analysts expect BTG’s EPS to decline 5.6% for its fiscal year 2022 and increase 8.8% for its fiscal year 2023. The company’s revenue is expected to increase 15.9% for the quarter ending June 30, 2022, and 1.1% for fiscal 2022, but decline 3.7% for fiscal 2023. BTG’s EPS is expected to increase 20% per annum over the next five years.
KGC’s revenue and EBITDA have grown at CAGRs of 5.1% and 11.6%, respectively, over the past three years. The Street expects its EPS to increase 95.1% in its fiscal year 2022, while its revenue is expected to increase 25.2% for the same period. The company’s EPS is expected to decline 8% per annum over the next five years.
Profitability
BTG’s trailing 12-month EPS is 2.4 times what KGC generates, while its trailing 12-month net income is 1.9 times what KGC generates. BTG is also profitable in terms of its gross profit , EBIT , and net income margins of 65.11%, 40.33%, and 23.84%, respectively, compared to KGC’s 51.16%, 14.31%, and 5.93%.
Furthermore, BTG’s 16.39%, 12.83%, and 15.30% respective ROE, ROA, and ROT compare with KGC’s 3.29%, 3.12%, and 3.92%.
Therefore, BTG is more profitable here.
Valuation
In terms of forward P/E, KGC is currently trading at 13.01x, which is 5% higher than BTG’s 12.39x. And KGC’s 9.08 forward EV/EBIT multiple is 36.3% higher than BTG’s 6.66.
Hence, BTG is relatively affordable here.
POWR Ratings
BTG has an overall B rating, which equates to Buy in our proprietary POWR Rating system. In contrast, KGC has an overall C rating, which translates to Neutral. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
BTG has a Quality grade of A, which is consistent with its 40.33% EBIT margin, which is 188.1% higher than the 14.00% industry average. In comparison, KGC has a C grade for Quality, which is in sync with its 14.31% EBIT margin, which is 2.2% higher than the industry average.
BTG and KGC have a Stability grade of C, which is consistent with their five-year monthly beta of 0.96 and 0.87, respectively.
And in the 34-stock Miners – Gold industry, BTG is ranked #6, while KGC is ranked #23. Click here to see the additional POWR Ratings for BTG. To see the additional POWR Ratings for KGC, click here.
Winner
With spot gold prices rallying amid the raging geopolitical crisis and expectations of further price surges, both KGC and BTG are well-positioned to benefit from these hikes. However, given that BTG is relatively more profitable than KGC, we think it might be a better bet now.
Our research shows that odds of success increase when one invests in stocks with an Overall Rating of Strong Buy or Buy. View all the top-rated stocks in the Miners – Gold industry here.
Click here to check out our Gold and Silver Industry Report for 2022
KGC shares were trading at $5.72 per share on Thursday afternoon, up $0.11 (+1.96%). Year-to-date, KGC has declined -1.01%, versus a -10.59% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research.
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