Is It Too Late To Buy Newmont Mining Corporation (NYSE:NEM) At Its May Price?

Newmont Mining Corporation (NYSE:NEM) closed yesterday at $39.97, which left some investors asking whether the high earnings potential can still be justified at this price. Let’s look into this by assessing NEM's expected growth over the next few years. See our latest analysis for Newmont Mining

Can we expect NEM to keep growing?

Newmont Mining's extremely high growth potential in the near future is attracting investors. The consensus forecast from 15 analysts is extremely positive with earnings per share estimated to surge from current levels of $0.075 to $1.873 over the next three years. This results in an annual growth rate of 21.93%, on average, which indicates an exceedlingly positive future in the near term.

Is NEM's share price justifiable by its earnings growth?

Newmont Mining is trading at price-to-earnings (PE) ratio of 533.1x, this also tells us the stock is overvalued based on current earnings compared to the metals and mining industry average of 12.55x , and overvalued compared to the US market average ratio of 18.37x .

After looking at NEM's value based on current earnings, we can see it seems overvalued relative to other companies in the industry. But, to properly examine the value of a high-growth stock such as Newmont Mining, we must reflect its earnings growth into the valuation. I find that the PEG ratio is simple yet effective for this exercise. A PE ratio of 533.1x and expected year-on-year earnings growth of 21.93% give Newmont Mining an eye-watering PEG ratio of 24.31x. Based on this growth, Newmont Mining's stock can be considered highly overvalued , based on its fundamentals.

What this means for you:

NEM's current overvaluation could signal a potential selling opportunity to reduce your exposure to the stock, or it you're a potential investor, now may not 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 NEM’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 NEM 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 NEM'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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com

Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article 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.