Investors Continue Waiting On Sidelines For Barrick Gold Corporation (TSE:ABX)

It's not a stretch to say that Barrick Gold Corporation's (TSE:ABX) price-to-earnings (or "P/E") ratio of 15.5x right now seems quite "middle-of-the-road" compared to the market in Canada, where the median P/E ratio is around 15x. Although, it's not wise to simply ignore the P/E without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

With earnings growth that's superior to most other companies of late, Barrick Gold has been doing relatively well. It might be that many expect the strong earnings performance to wane, which has kept the P/E from rising. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's not quite in favour.

Check out our latest analysis for Barrick Gold

Want the full picture on analyst estimates for the company? Then our free report on Barrick Gold will help you uncover what's on the horizon.

What Are Growth Metrics Telling Us About The P/E?

The only time you'd be comfortable seeing a P/E like Barrick Gold's is when the company's growth is tracking the market closely.

Retrospectively, the last year delivered an exceptional 69% gain to the company's bottom line. EPS has also lifted 9.2% in aggregate from three years ago, mostly thanks to the last 12 months of growth. So we can start by confirming that the company has actually done a good job of growing earnings over that time.

Turning to the outlook, the next three years should generate growth of 16% per year as estimated by the twelve analysts watching the company. That's shaping up to be materially higher than the 12% per annum growth forecast for the broader market.

With this information, we find it interesting that Barrick Gold is trading at a fairly similar P/E to the market. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.

The Bottom Line On Barrick Gold's P/E

Typically, we'd caution against reading too much into price-to-earnings ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

We've established that Barrick Gold currently trades on a lower than expected P/E since its forecast growth is higher than the wider market. There could be some unobserved threats to earnings preventing the P/E ratio from matching the positive outlook. It appears some are indeed anticipating earnings instability, because these conditions should normally provide a boost to the share price.

There are also other vital risk factors to consider before investing and we've discovered 1 warning sign for Barrick Gold that you should be aware of.

You might be able to find a better investment than Barrick Gold. If you want a selection of possible candidates, check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.