Westgold Resources (ASX:WGX): Assessing Valuation After Ambitious Three-Year Growth and Cost Reduction Plan

Westgold Resources (ASX:WGX) has set the stage with a three-year outlook that aims to ramp up annual gold production and lower costs by fiscal 2028. This fully funded plan puts operational growth at the forefront for investors.

See our latest analysis for Westgold Resources.

Westgold’s recent unveiling of its three-year growth outlook has coincided with a gentle upward drift in its share price, now trading at $5.51. While this news has not sparked dramatic moves, the company’s 1-year total shareholder return sits at just over 1%, suggesting that market confidence is steady but not yet fully ignited for a bigger breakout.

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The big question now is whether Westgold’s upbeat outlook is being undervalued by the market, or if the current share price already reflects its ambitious targets and future growth. Is there still a buying opportunity ahead?

Most Popular Narrative: 26.7% Overvalued

With Westgold Resources closing at A$5.51 while the most widely followed narrative estimates fair value at A$4.35 per share, investors face a notable premium. The narrative suggests the recent price surge runs ahead of the calculated fair value, raising questions about what is fueling such optimism.

Disciplined cost control, asset rationalization (including the sale of Lakewood), and targeted investments in automation and debottlenecking are setting the company up for lower all-in sustaining costs, increasing free cash flow and supporting potential for higher shareholder returns via dividends and/or buybacks.

Read the complete narrative.

Curious why this narrative sets such a precise price ceiling? It is all about ambitious financial improvements driving margin expansion and future payouts. Want to uncover the wild growth and profitability targets that shape this calculation? Dive into the details to find surprises in the numbers behind this overvaluation call.

Result: Fair Value of $4.35 (OVERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, persistent lower ore grades or integration risks from the Karora transaction could create challenges for Westgold’s ambitious forecasts and put pressure on future earnings growth.

Find out about the key risks to this Westgold Resources narrative.

Another View: DCF Suggests a Big Discount

While analyst consensus points to Westgold being overvalued based on current trading and future earnings targets, our SWS DCF model tells a different story. Using projected cash flows, it estimates fair value at A$13.90, which is more than double the current share price. Can this deep undervaluation hold as fundamentals evolve?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Westgold Resources for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Westgold Resources Narrative

If you have a different perspective or want to dig into Westgold’s numbers on your own terms, crafting your own narrative is simple and quick to do. Do it your way

A great starting point for your Westgold Resources research is our analysis highlighting 2 key rewards and 2 important warning signs that could impact your investment decision.

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This article by Simply Wall St 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. Simply Wall St has no position in any stocks mentioned.

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