Highland Gold Mining Limited (LON:HGM): Is It A Smart Long Term Opportunity?

In June 2018, Highland Gold Mining Limited (LON:HGM) released its earnings update. Generally, analyst consensus outlook appear cautiously subdued, as a 2.2% rise in profits is expected in the upcoming year, against the higher past 5-year average growth rate of 3.3%. By 2020, we can expect Highland Gold Mining’s bottom line to reach US$67m, a jump from the current trailing-twelve-month of US$65m. I will provide a brief commentary around the figures and analyst expectations in the near term. Investors wanting to learn more about other aspects of the company should research its fundamentals here.

See our latest analysis for Highland Gold Mining

Exciting times ahead?

The view from 3 analysts over the next three years is one of positive sentiment. Broker analysts tend to forecast up to three years ahead due to a lack of clarity around the business trajectory beyond this. To reduce the year-on-year volatility of analyst earnings forecast, I’ve inserted a line of best fit through the expected earnings figures to determine the annual growth rate from the slope of the line.

AIM:HGM Future Profit January 7th 19
AIM:HGM Future Profit January 7th 19

This results in an annual growth rate of 20% based on the most recent earnings level of US$65m to the final forecast of US$97m by 2022. EPS reaches $0.30 in the final year of forecast compared to the current $0.20 EPS today. With a current profit margin of 21%, this movement will result in a margin of 21% by 2022.

Next Steps:

Future outlook is only one aspect when you’re building an investment case for a stock. For Highland Gold Mining, there are three fundamental factors you should look at:

  1. Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
  2. Valuation: What is Highland Gold Mining 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 Highland Gold Mining is currently mispriced by the market.
  3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Highland Gold Mining? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!

To help readers see past 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.