Has Newmont’s 164% Surge in 2024 Already Priced In Its Future Growth?

• Wondering if Newmont is still a smart buy after its big run, or if the value has already been mined out of the stock? You are in the right place to unpack what the current price really implies.
• Newmont has surged recently, climbing about 3.2% over the last week, 15.7% over the last month, and 164.0% year to date, with a 169.1% gain over the past year that has completely changed how many investors see its risk and reward profile.
• Those moves have come alongside renewed interest in gold and copper producers, as investors react to shifting expectations around inflation, interest rates, and geopolitical risk. Newmont has also been in the headlines for its portfolio optimization and capital allocation decisions, which together help explain why the market is reassessing its long term prospects.
• Even after this run, Newmont scores a 4/6 valuation check, suggesting it still looks undervalued on several fronts. In what follows, we will walk through what different valuation methods say about the stock, and then finish by looking at a more powerful way to think about its true worth.

Newmont delivered 169.1% returns over the last year. See how this stacks up to the rest of the Metals and Mining industry.

Approach 1: Newmont Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow model estimates what a company is worth by projecting the cash it can generate in the future and then discounting those cash flows back to today in $ terms.

Newmont currently generates about $5.3 Billion in free cash flow, and analyst and model projections suggest this could rise toward roughly $7.4 Billion by 2035 as operations scale and then mature. In the near term, analyst estimates see free cash flow staying robust, with projections around $8.0 Billion by 2029, before growth tapers and Simply Wall St extrapolations take over for the outer years.

Using a 2 Stage Free Cash Flow to Equity model, these projected cash flows imply an intrinsic value of around $112.25 per share. Compared with the current share price, this points to the stock trading at roughly a 9.8% discount, which is close enough to call it broadly in line with fair value rather than a deep bargain.

Result: ABOUT RIGHT

Newmont is fairly valued according to our Discounted Cash Flow (DCF), but this can change at a moment's notice. Track the value in your watchlist or portfolio and be alerted on when to act.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Newmont.

Approach 2: Newmont Price vs Earnings

For a profitable business like Newmont, the price to earnings, or PE, ratio is a practical way to gauge how much investors are willing to pay for each dollar of current earnings. In general, companies with stronger growth prospects and lower perceived risk can justify a higher PE, while slower growth or higher risk usually calls for a lower multiple.

Newmont currently trades on about 15.4x earnings. That is well below the Metals and Mining industry average of roughly 25.4x, and also cheaper than the broader peer group, which sits around 28.3x. At first glance, that discount suggests the market is still cautious about Newmont despite its recent rally.

Simply Wall St’s Fair Ratio framework goes a step further than simple peer comparisons. It estimates what PE multiple a company should trade on, given its earnings growth outlook, profitability, risk profile, industry, and market cap. For Newmont, that Fair Ratio is about 24.5x, which is materially higher than the current 15.4x. That gap implies the market is pricing Newmont below what its fundamentals would typically warrant.

Result: UNDERVALUED

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Upgrade Your Decision Making: Choose your Newmont Narrative

Earlier we mentioned that there is an even better way to understand valuation. Let us introduce Narratives, a simple way to turn your view of Newmont into a story that connects assumptions about its future revenue, earnings and margins to a financial forecast and then to a fair value. This is all available within an easy tool on Simply Wall St’s Community page that millions of investors use to compare their Fair Value with the current Price, see when their story says to buy or sell, and watch that story update dynamically as new news or earnings arrive. For example, one Newmont Narrative might assume constructive gold prices, successful acquisitions and rising margins that justify a fair value near the higher end of recent targets around $104. Another more cautious Narrative might focus on operational and macro risks and land closer to the low end near $58, allowing you to decide which story you believe and how to act on it.

Do you think there's more to the story for Newmont? Head over to our Community to see what others are saying!

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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