New Gold (TSX:NGD) Valuation: Is There More Upside After a 153% Year-to-Date Surge?

New Gold (TSX:NGD) shares have caught some attention recently, especially as the stock has delivered a strong 54% gain over the past 3 months. Investors are starting to ask whether this momentum reflects improved fundamentals or is a result of shifting market sentiment.

See our latest analysis for New Gold.

New Gold’s share price momentum has been especially strong in 2024, building on a series of operational improvements and a surging gold price environment. With a current share price of $9.58, the stock has climbed rapidly, boasting a year-to-date share price return of 153% and a remarkable 145% total shareholder return over the past year. This signals that positive sentiment and growth expectations are on the rise.

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The key question now is whether New Gold’s stellar run means it remains undervalued, or if the market has already priced in its future growth. Could there still be a buying opportunity here, or is everything already factored in?

Most Popular Narrative: 17.4% Undervalued

New Gold's most popular valuation narrative signals that the share price is trading well below its estimated fair value, even after this year’s rally. With analysts projecting a notably higher target, the focus now turns to the bold assumptions powering that outlook.

Ramp-up of higher-grade ore production at both Rainy River (open pit and underground) and New Afton (C-Zone block cave), supported by strong operational execution and milestones achieved, is expected to drive increased gold and copper output at lower unit costs. This would directly improve revenue and net margins over the next 2 to 3 years.

Read the complete narrative.

Want to peek behind the curtain at what’s fueling this valuation? The narrative is built on explosive growth assumptions in both top-line and profit margins, plus a future profit multiple not often seen in this sector. Analysts appear to be betting on a transformation that could rewrite New Gold’s financial story. Find out what’s got them so confident—what key financial leaps are they banking on?

Result: Fair Value of $11.60 (UNDERVALUED)

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

However, ongoing reliance on just two core mines and the potential for rising costs could still threaten New Gold's impressive growth outlook.

Find out about the key risks to this New Gold narrative.

Another View: Multiples Tell a Different Story

While the fair value estimate paints New Gold as markedly undervalued, looking at its price-to-earnings ratio offers a less optimistic angle. The current ratio of 37.4x is higher than both the Canadian Metals and Mining industry (24x) and its peers (21.2x). Compared to the fair ratio of 33.8x, shares are not cheap on this measure, suggesting heightened valuation risk if earnings do not accelerate fast enough. Could this premium signal market confidence or caution?

See what the numbers say about this price — find out in our valuation breakdown.

Build Your Own New Gold Narrative

If you think there’s another story unfolding, or want to dive into the numbers and chart your own course, it’s simple to build a narrative in just a few minutes: Do it your way

A good starting point is our analysis highlighting 4 key rewards investors are optimistic about regarding New Gold.

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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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