Is Newcrest Mining Limited (ASX:NCM) Undervalued?

Today we're going to take a look at the well-established Newcrest Mining Limited (ASX:NCM). The company's stock received a lot of attention from a substantial price movement on the ASX over the last few months, increasing to A$22.22 at one point, and dropping to the lows of A$19.39. This high level of volatility gives investors the opportunity to enter into the stock, and potentially buy at an artificially low price. A question to answer is whether Newcrest Mining's current trading price of A$21.04 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Newcrest Mining’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change. See our latest analysis for Newcrest Mining

What's the opportunity in Newcrest Mining?

Newcrest Mining appears to be overvalued by 21% at the moment, based on my discounted cash flow valuation. The stock is currently priced at AU$21.04 on the market compared to my intrinsic value of A$17.32. This means that the buying opportunity has probably disappeared for now. Another thing to keep in mind is that Newcrest Mining’s share price is quite stable relative to the rest of the market, as indicated by its low beta. This means that if you believe the current share price should move towards its intrinsic value over time, a low beta could suggest it is not likely to reach that level anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range again.

What does the future of Newcrest Mining look like?

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. With profit expected to more than double over the next couple of years, the future seems bright for Newcrest Mining. It looks like higher cash flows is on the cards for the stock, which should feed into a higher share valuation.

What this means for you:

Are you a shareholder? NCM’s optimistic future growth appears to have been factored into the current share price, with shares trading above its fair value. At this current price, shareholders may be asking a different question – should I sell? If you believe NCM should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on NCM for a while, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the positive outlook is encouraging for NCM, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Newcrest Mining. You can find everything you need to know about Newcrest Mining in the latest infographic research report. If you are no longer interested in Newcrest Mining, you can use our free platform to see my list of over 50 other stocks with a high growth potential.

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Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.