Barrick Gold Trading Cheaper Than Industry: Should You Buy the Stock?
Barrick Gold Corporation’s GOLD stock is currently trading at a forward price/earnings of 10.81X, a roughly 23.7% discount to the Zacks Mining – Gold industry’s average of 14.16X. It also has a Value Score of A.GOLD’s shares are trading roughly 19.5% below its 52-week high of $21.35, reached on Oct. 21, 2024. Image Source: Zacks Investment ResearchTechnical indicators show that GOLD is trading below the 200-day simple moving average (SMA) since Nov. 25, 2024. However, the stock eclipsed its 50-day SMA on Jan. 30, 2025, indicating bullish momentum. GOLD Trades Above 50-Day SMA Image Source: Zacks Investment ResearchBarrick’s cheap valuation should lure investors seeking value. But is the time right to buy GOLD’s shares based on its attractive valuation? Let’s delve deeper.Key Projects to Drive Production Upside for BarrickBarrick is well-placed to benefit from the progress in key growth projects that should significantly contribute to its production. Its major gold and copper growth projects, including Goldrush, the Pueblo Viejo plant expansion and mine life extension, Donlin Gold, Fourmile, Lumwana Super Pit and Reko Diq, are currently being executed. These projects are advancing on schedule and within budget, underpinning the next generation of profitable production. The Goldrush mine is ramping up to a targeted 400,000 ounces of production per annum by 2028. Bordering Goldrush is the 100% Barrick-owned Fourmile, which is yielding grades double those of Goldrush and is anticipated to become another Tier One mine. The Reko Diq copper-gold project in Pakistan is designed to produce 400,000 tons of copper and 500,000 ounces of gold annually in its second development phase. In October 2024, Barrick announced the commencement of the development of a Super Pit at its Lumwana copper mine in Zambia. The Super Pit Expansion entails doubling the present process circuit's throughput and substantially boosting mining volumes. Upon completion, the $2 billion project has the potential to transform Lumwana into a long-term, high-yielding, top-25 copper producer and Tier One copper mine.Rallying Gold Prices to Drive GOLD’s Margins and Cash FlowGold has been among the best-performing assets in 2024. Gold prices rallied roughly 27% last year, driven by strong demand from central banks, monetary easing in the United States, global uncertainties and a surge in safe-haven demand thanks to increased tensions in the Middle East and Russia. Gold prices are shooting up this month as the intense U.S.-China tariff war has boosted safe-haven demand for bullion. Prices hit a record high of $2,882 per ounce on Feb. 5 and are already up nearly 10% this year. Gold prices are likely to continue to gain support in an uncertain environment triggered by the tariff war. Expectations of increased purchases by central banks, rising hopes of interest rate cuts and geopolitical tensions are other factors that are expected to help the yellow metal sustain the rally. Higher gold prices should translate into strong profit margins and free cash flow generation for GOLD.GOLD’s Strong Liquidity & Attractive Dividend Bode Well Barrick has a solid liquidity position and generates healthy cash flows, positioning it well to take advantage of attractive development, exploration and acquisition opportunities, drive shareholder value and reduce debt. At the end of the third quarter of 2024, Barrick’s cash and cash equivalents were around $4.2 billion. It also generated an operating cash flow of $1.18 billion and a free cash flow of $444 million. GOLD offers a healthy dividend yield of 2.3% at the current stock price. Its payout ratio is 37% (a ratio below 60% is a good indicator that the dividend will be sustainable), with a five-year annualized dividend growth rate of roughly 7%.Higher Production Costs a Drag on GOLD StockGOLD is challenged by higher costs, which may eat into its margins. Its cash costs per ounce and all-in-sustaining costs (AISC) — the most important cost metric of miners — increased significantly in 2023 due to lower production and sales volumes, along with unplanned costs and changes in the sales mix across different mine sites. In the third quarter of 2024, cash costs per ounce of gold increased around 21% year over year, while AISC rose roughly 20%. GOLD projects total cash costs per ounce of $940-$1,020 and AISC of $1,320-$1,420 per ounce for full-year 2024, which indicates a year-over-year increase at the midpoint of the respective ranges. Increased mine-site sustaining capital spending, higher labor costs and potentially steeper energy costs may lead to higher costs.Barrick’s Earnings Estimates Southbound Earnings estimates for Barrick have been revised downward over the past 60 days. The Zacks Consensus Estimate for 2024 and 2025 has been revised lower over the same time frame. Find the latest earnings estimates and surprises on Zacks Earnings Calendar. Image Source: Zacks Investment ResearchGOLD Stock Underperforms Industry and S&P 500 GOLD’s shares have gained 15.9% over the past year, underperforming the industry’s 48.6% increase and the S&P 500’s rise of 22.4%. Among its peers, Newmont Corporation NEM, Kinross Gold Corporation KGC and Agnico Eagle Mines Limited AEM have racked up gains of 34.6%, 123.9% and 109.8%, respectively, over the same period. GOLD’s One-year Price Performance Image Source: Zacks Investment ResearchHow Should Investors Play the GOLD Stock?Barrick’s actions to boost production, robust financial health and a safe dividend yield paint a promising picture. The strength in gold prices should also boost its profitability and drive cash flow generation. Despite GOLD’s attractive valuation, its high production costs warrant caution. Therefore, holding onto this Zacks Rank #3 (Hold) stock will be prudent for investors who already own it. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Free Today: Profiting from The Future’s Brightest Energy SourceThe demand for electricity is growing exponentially. At the same time, we’re working to reduce our dependence on fossil fuels like oil and natural gas. Nuclear energy is an ideal replacement.Leaders from the US and 21 other countries recently committed to TRIPLING the world’s nuclear energy capacities. 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