Is It Too Late To Consider Kinross Gold After Its 176.6% Year To Date Surge?

• If you are wondering whether Kinross Gold is still a smart buy after its huge run, or if you are late to the party, this article will walk through what the numbers are really saying about value.
• The stock has surged, with shares up 2.5% over the last week, 9.7% over the last month, 176.6% year to date, and 199.1% over the last year. Longer term returns of 629.1% over 3 years and 358.8% over 5 years suggest this is not just a short term blip.
• Recent momentum has been driven by a mix of stronger gold prices and growing investor interest in established, low cost producers like Kinross Gold, as the market looks for leverage to the metal without taking on early stage exploration risk. At the same time, sector wide chatter about potential consolidation among mid tier and senior miners has kept attention on companies with sizeable, diversified asset bases and improving balance sheets. Both of these factors help explain the renewed enthusiasm for Kinross.
• On our framework, Kinross currently scores a 2 out of 6 valuation checks, which suggests some value angles but also a few yellow flags. Next we will break down how different valuation methods view the stock, before finishing with a more holistic way to judge whether it is genuinely undervalued.

Kinross Gold scores just 2/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Kinross Gold Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow model estimates what a business is worth today by projecting the cash it can generate in the future and then discounting those cash flows back to a present value.

For Kinross Gold, the latest twelve month Free Cash Flow is about $1.87 billion. Analysts and modelled estimates see cash flows remaining solid but gradually easing over time, with projected Free Cash Flow of roughly $0.78 billion in 10 years. These figures combine analyst forecasts for the next few years with longer term extrapolations produced by Simply Wall St’s 2 Stage Free Cash Flow to Equity model.

Aggregating all those discounted cash flows gives an estimated intrinsic value of about $23.63 per share. Compared with the current share price, this implies the stock is roughly 66.8% overvalued on a pure cash flow basis. This suggests that a lot of optimism about gold prices and Kinross’ operations is already embedded in the market price.

Result: OVERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Kinross Gold may be overvalued by 66.8%. Discover 914 undervalued stocks or create your own screener to find better value opportunities.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Kinross Gold.

Approach 2: Kinross Gold Price vs Earnings

For a profitable, established miner like Kinross Gold, the Price to Earnings (PE) ratio is a useful way to judge value because it links what investors pay directly to the company’s current earnings power. In general, faster growing and less risky businesses tend to justify a higher PE, while slower growth or higher risk usually means the “normal” or “fair” PE should be lower.

Kinross currently trades on a PE of about 19.6x. That is slightly below the Metals and Mining industry average of roughly 20.9x, and well below the broader peer group average of around 40.5x. At first glance this makes the stock look reasonably priced. However, Simply Wall St’s Fair Ratio for Kinross is 19.5x, which is a proprietary estimate of what its PE should be once you factor in its specific earnings growth outlook, profitability, risk profile, size and industry.

This Fair Ratio is more tailored than a simple comparison with peers or the sector, because it adjusts for Kinross’ own fundamentals rather than assuming it should trade like the average miner. With the actual PE (19.6x) sitting almost exactly on the Fair Ratio (19.5x), the shares look fairly valued on an earnings basis.

Result: ABOUT RIGHT

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1466 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Kinross Gold Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives, which are simply your story about a company, translated into numbers like fair value, and estimates for future revenue, earnings and margins.

Instead of stopping at a PE ratio or DCF output, a Narrative connects three things in a single, easy to use framework on Simply Wall St’s Community page: what you believe is happening in the business, how that should show up in future financials, and the fair value that drops out of those assumptions.

Once you have a Narrative, the platform compares your fair value to today’s share price. This can help you decide whether Kinross Gold might be a buy, a hold, or a sell under your assumptions, and then keeps that view current by dynamically updating the Narrative as new news, earnings and guidance arrive.

For example, one Kinross Narrative might assume resilient margins, steady production and buybacks that result in a fair value close to 38.33 dollars. A more cautious investor, focused on cost inflation and permitting risks, might set a much lower fair value near 9.98 dollars, which could lead to very different decisions at the same market price.

Do you think there's more to the story for Kinross Gold? Head over to our Community to see what others are saying!

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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