Should You Buy, Sell, or Hold Yamana Gold Inc. Today?

Yamana Gold Inc.’s (TSX:YRI)(NYSE:AUY) stock has remained relatively flat since it reported earnings on February 11. Should you be a long-term buyer today?

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Yamana Gold Inc. (TSX:YRI)(NYSE:AUY), one of world’s leading producers of gold, announced fourth-quarter earnings after the market closed on February 11, and its stock has remained relatively flat in the trading sessions since. Let’s take a closer look at the quarterly results to determine if this lack of movement is a long-term buying opportunity, or a warning sign.

Breaking down the quarterly results

Here’s a breakdown of Yamana’s fourth-quarter earnings results compared to its results in the same quarter a year ago.

Metric Q4 2014 Q4 2013
Earnings Per Share ($0.34) ($0.59)
Revenue $542.94 million $420.66 million

Source: Yamana Gold Inc.

In the fourth quarter of fiscal 2014, Yamana reported a net loss of $299.55 million from continuing operations, or $0.34 per share, compared to a net loss of $442.76 million, or $0.59 per share, in the year ago period, as its revenue increased 29.1%. The company’s narrowed loss and double-digit increase in revenue can be attributed to it selling 402,043 ounces of gold during the quarter, an increase of 54.3% from the 260,568 ounces sold in the year-ago period, and this growth more than offset the negative impact of its average realized gold price per pound decreasing 6.1% to $1,199.

Yamana also noted that it produced a record 405,615 ounces of gold equivalents in the fourth quarter, and this represented an increase of 4% from the third quarter and 33.5% from the year-ago quarter.

Here’s a quick summary of eight other notable statistics and updates from the report compared to the year-ago period:

  1. Production of silver increased 22.7% to 2.7 million ounces.
  2. Production of copper decreased 2.8% to 35 million pounds.
  3. Cash costs per gold equivalent ounce increased 16.1% to $484.
  4. All-in sustaining cash costs (AISC) increased 2.7% to $774 per gold equivalent ounce.
  5. Average realized silver price per ounce decreased 20.6% to $16.39.
  6. Average realized copper price per pound decreased 11.3% to $2.99.
  7. Operating earnings increased 25% to $87.63 million.
  8. Cash flow generated from continuing operations increased 10.7% to $183.63 million.

Yamana provided its outlook on fiscal 2015, calling for the following performance:

  • The production of approximately 1.3 million ounces of gold
  • The production of approximately 9.7 million ounces of silver
  • The production of approximately 120 million pounds of copper
  • Cash costs of $545 per ounce of gold and $6 per ounce of silver
  • All-in sustaining cash costs (AISC) of $800-$830 per ounce of gold and $9.50-$9.80 per ounce of silver

Should you be a long-term buyer of Yamana Gold today?

Yamana Gold is one of the world’s leading producers of gold, and increased production led it to a very strong fourth-quarter performance, but its stock has remained flat in the days since.

I think Yamana represents an attractive long-term opportunity today, because its production has grown at a consistent rate in recent years and because its stock trades at inexpensive forward valuations, including just 33.4 times fiscal 2015’s estimated earnings per share of $0.15, only 20.9 times fiscal 2016’s estimated earnings per share of $0.24, and a mere 15.2 times fiscal 2017’s estimated earnings per share of $0.33.

With all of the information above in mind, I think Yamana Gold represents a great long-term opportunity today, so investors should take a closer look and consider initiating positions on any weakness provided by the market.

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 Joseph Solitro has no position in any stocks mentioned.

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