When stocks are plummeting in price, it’s hard to start buying into all the uncertainty. But a disciplined long term investor knows there’s no better time to buy than right now. And I’m not talking about buying into speculative, high-risk stocks. I’m talking about the well-proven, robust track record Kirkland Lake Gold Ltd. Why? Size. Financial health. Proven performance. Check out our latest analysis for Kirkland Lake Gold
Kirkland Lake Gold Ltd. engages in the exploration and development of gold properties. Kirkland Lake Gold was established in 1983 and has a market cap of US$5.95b, putting it in the mid-cap category. Size matters. The bigger the company is, the more well-resourced it is. The more money it produces from its operations which means it is less reliant on external funding. When times are bad in the market, being self-sufficient is extremely important as you can continue to operate at your own pace. Therefore, large cap companies are a great bet to invest in when you’re heading to the bottom of the cycle.
With US$39.09m debt on its books, Kirkland Lake Gold has to pay interest periodically. This means it needs to have enough cash on hand to meet these upcoming expenses. With an interest coverage ratio of 33.08x, Kirkland Lake Gold produces sufficient earnings (EBIT) to cover its interest payments. Anything above 3x is considered safe practice. Furthermore, its cash flows from operations copiously covers it debt by over 2x, much higher than the safe minimum of 0.2x. Its cash and short-term investment is also sufficient to cover other upcoming liabilities, which means KL is financially robust in the face of a volatile market.
KL’s year-on-year earnings growth has been positive over the past five years, with an average annual growth rate of 39.88%, overtaking the industry growth rate of 11.53%. It has also returned an ROE of 16.44% recently, above the industry return of 11.25%. Kirkland Lake Gold’s strong performance over time is a demonstration of its ability to grow through cycles, raising my confidence in the company as a long-term investment.
Next Steps:Based on these three factors, KL makes for a strong long-term investment in the face of a fickle stock market. If you’re a risk averse investor, lining your portfolio with proven companies you’re willing to buy more and more of as the price falls, is a good strategy to build your wealth over the long run. This is the beginning of your research, but before you decide to buy KL, I highly urge you to understand more about the company, in particular, in these following areas:
- Future Outlook: What are well-informed industry analysts predicting for KL’s future growth? Take a look at our free research report of analyst consensus for KL’s outlook.
- Valuation: What is KL worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether KL is currently mispriced by the market.
- 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.