Does Kirkland Lake Gold Ltd’s (TSE:KL) July Stock Price Reflect Its Future Growth?

Looking at Kirkland Lake Gold Ltd’s (TSE:KL) fundamentals some investors are wondering if its last closing price of CA$28.65 represents a good value for money for this high growth stock. Let’s take a look at some key metrics to determine whether there’s any value here for current and potential future investors.

See our latest analysis for Kirkland Lake Gold

Where’s the growth?

Kirkland Lake Gold’s extremely high growth potential in the near future is attracting investors. Expectations from 6 analysts are extremely positive with earnings per share estimated to rise from today’s level of $0.936 to $1.342 over the next three years. This indicates an estimated earnings growth rate of 27.32% per year, on average, which indicates an exceedlingly positive future in the near term.

Can KL’s share price be justified by its earnings growth?

KL is available at a PE (price-to-earnings) ratio of 23.25x today, which tells us the stock is overvalued based on current earnings compared to the metals and mining industry average of 10.86x , and overvalued compared to the CA market average ratio of 16.46x . This multiple is a median of profitable companies of 25 Metals and Mining companies in CA including Winston Resources, Stelco Holdings and Knick Exploration.

TSX:KL PE PEG Gauge July 25th 18
TSX:KL PE PEG Gauge July 25th 18

We already know that KL appears to be overvalued when compared to its industry average. But, seeing as Kirkland Lake Gold is perceived as a high-growth stock, we must also account for its earnings growth, which is captured in the PEG ratio. A PE ratio of 23.25x and expected year-on-year earnings growth of 27.32% give Kirkland Lake Gold a low PEG ratio of 0.85x. This means that, when we account for Kirkland Lake Gold’s growth, the stock can be viewed as fairly valued , based on its fundamentals.

What this means for you:

KL’s current undervaluation could signal a potential buying opportunity to increase your exposure to the stock, or it you’re a potential investor, now may be the right time to buy. However, basing your investment decision off one metric alone is certainly not sufficient. There are many things I have not taken into account in this article and the PEG ratio is very one-dimensional. If you have not done so already, I urge you to complete your research by taking a look at the following:

  1. Financial Health: Is KL’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
  2. Past Track Record: Has KL been consistently performing well irrespective of the ups and downs in the market? Go into more detail in the past performance analysis and take a look at the free visual representations of KL’s historicals for more clarity.
  3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.