The Stock Picker’s Guide to Goldcorp Inc. for 2015

Should you buy Goldcorp Inc. (TSX:G)(NYSE:GG)? Or is Barrick Gold Corp (TSX:ABX)(NYSE:ABX) a better alternative?

| More on:

Last year was not a particularly great one for Goldcorp Inc (TSX:G)(NYSE:GG) or its investors, with the shares down about 6%. Granted, the news could have been a lot worse – three of Goldcorp’s large Canadian peers saw declines of 30% or more.

Of course the languishing gold price is mainly responsible – the price remains stuck around US$1,200 per ounce. But Goldcorp had its own share of problems, including some disappointing results at one of its Mexican mines.

But with the stock now trading just over $23 (as of this writing), should you buy Goldcorp as we head into 2015? Below we take a look.

A best-in-class company

When it comes to mining gold, few companies command as much respect as Goldcorp.

Part of this comes from its financial discipline. Unlike many other large gold producers, the company has not made any reckless acquisitions or had any operational disasters.

As a result, the company’s balance sheet has remained in pristine shape, which has been an absolute blessing in this gold price environment. To illustrate, its net debt stands at roughly $2.6 billion as of September, only about 15% of the company’s market value. By comparison, Barrick Gold Corp (TSX:ABX)(NYSE:ABX) has net debt of more than $10 billion, about two thirds of its market value.

Better yet, Goldcorp also is mining in very safe jurisdictions, with more than two-thirds of production coming from North America. Given what has happened to miners on other continents, this is a big plus for Goldcorp.

Its stock is trading well above its peers

Because of Goldcorp’s prudence, as well as its reputation, its stock has not declined by very much, at least not relative to peers.

More specifically, the company’s shares have declined by about 50% over the last three years. This sounds awful. But Yamana Gold Inc shares fell 61%, Barrick fell 74%, and Kinross Gold Corporation has fallen by more than 80% over the same timeframe.

Unfortunately, this also means that Goldcorp is more expensive than peers. To illustrate, the company is currently valued at about $21.7 billion (including debt), or $6,000 per ounce of gold production. Meanwhile, Barrick trades for only about $4,000 per ounce of gold production (again including debt). And Barrick’s costs are actually lower than Goldcorp’s.

This comparison isn’t entirely fair – Goldcorp is still growing production, while Barrick’s output has been shrinking. But the price difference is too great to ignore.

So should you own the stock?

If you’re looking for exposure to the gold sector, and insist on holding top-quality stocks, then Goldcorp is certainly one to consider.

Otherwise, the shares should probably be avoided. It is clearly a very popular stock, and its share price reflects this. You’ll probably find more upside in other gold companies – or by investing in gold itself.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Benjamin Sinclair has no position in any stocks mentioned.

More on Metals and Mining Stocks

stock market
Metals and Mining Stocks

Is Barrick Gold Stock a Buy in 2024?

Barrick Gold (TSX:ABX) is often regarded as one of the best precious metal stocks to own. But should you buy…

Read more »

sale discount best price
Metals and Mining Stocks

3 Cheap TSX Stocks to Buy Right Now

TSX stocks such as Barrick Gold and two others are trading at a cheap multiple and at a discount to…

Read more »

A miner down a mine shaft
Metals and Mining Stocks

3 Copper Stocks to Buy as the Commodity Continues to Soar

Are you looking to get in on the growth of copper stocks? These are the biggest heavy hitters out there…

Read more »

Hands holding trophy cup on sky background
Metals and Mining Stocks

The Best Gold Stock to Invest $1,000 in Right Now

Agnico-Eagle Mines is my favourite gold stock to own, due to its low-risk profile and strong dividend history.

Read more »

Diggers and trucks in a coal mine
Metals and Mining Stocks

1 Canadian Mining Stock Worth a Long-Term Investment

Cameco (TSX:CCO) stock could be a great long-term investment for Canadian growth seekers.

Read more »

STACKED COINS DEPICTING MONEY GROWTH
Stocks for Beginners

Got $200? 1 Copper Stock to Buy and Hold Forever

This copper stock is worth its weight in gold. Or actually, in copper! Given that the price of the material…

Read more »

A miner down a mine shaft
Metals and Mining Stocks

Lundin Stock Looks Like a Deal After Earnings

Lundin (TSX:LUN) stock fell slightly after earnings that were lower than the previous two quarters, yet copper demand remains high.

Read more »

Hand writing Time for Action concept with red marker on transparent wipe board.
Metals and Mining Stocks

3 No-Brainer Copper Stocks to Buy With $200 Right Now

Are you looking for growth? These three copper stocks have been on a tear, with even more predicted in 2024…

Read more »