What analysts think about the future of Barrick Gold Corporation’s (ABX) business?

Analysts covering Barrick Gold Corporation (NYSE:ABX) are predicting the earnings to drop -20.9% in years’ time. What are the important facts you need to know? Today I’m going research the future of this stock in more detail. View our latest analysis for Barrick Gold

How is Barrick Gold going to perform in the future?

There are dark clouds over Barrick Gold’s potential over the next couple of years. Analysts covering the company are expecting the EPS to drop down to $0.89, a significant decline from previous levels of around $1.22. Based on the estimates this means a -40.7% reduction in three year’s time. Not the best news.

Barrick Gold (NYSE:ABX) Past Future Earnings May 12th 17
Barrick Gold (NYSE:ABX) Past Future Earnings May 12th 17

In the same period we will see the revenue dip from $8.62 Billion M to $7.26 Billion M in 2020 and profit is predicted to decline from $1.42 Billion to $909 Million in 2020, during this period margins are predicted to be a respectable 12.5% .

Is there any basis for growth?

Whilst ABX’s Return on Equity of 17.8% isn’t horrific, it means that the company has underperformed the Materials industry average of 18.5%. Slightly concerning, this metric is not expected to improve with analysts predicting ROE in 3 years to be 7.9%.

Barrick Gold (NYSE:ABX) Future Perf May 12th 17
Barrick Gold (NYSE:ABX) Future Perf May 12th 17

Return on equity (ROE) is a measure of how much profit (net income) a company makes as a percentage of the shareholders equity. Equity is made up of funds from the original issuing of shares and any retained earnings from previous financial years. It varies considerably across sectors, for this reason it is important to asses a stocks ROE relative to its industry. Whilst it is true that the higher the ROE the better the company is performing, ROE does have a weakness. A stock with a disproportionate amount of debt can lead to a small equity base. Thus, a small amount of net income (the numerator) could still produce a high ROE off a modest equity base (the denominator). For this reason investors should always consider the debt situation in conjunction with ROE.

Final words

Barrick Gold may have a few turbulent years in front of it but despite (or maybe because of) that it could still be offering an interesting investment opportunity. I recommend you see our latest FREE analysis to find out!

If you are not interested in ABX anymore, you can use our free platform to see my list of over 150 other stocks with a high growth potential.