Eldorado Gold Corp. (TSX:ELD)(NYSE:EGO), one of the world’s leading low-cost gold producers, announced fourth-quarter earnings after the market closed on February 19, and its stock responded by rising over 3.5% in the trading session that followed. Let’s take a closer look at the quarterly results and the company’s outlook on fiscal 2015 to determine if this could be the beginning of a sustained rally higher, or if we should wait for a better entry point in the trading sessions ahead.
The results that enabled the rally
Here’s a summary of Eldorado’s fourth-quarter earnings results compared to its results in the same period a year ago.
|Metric||Q4 2014||Q4 2013|
|Earnings Per Share||$0.02||($0.96)|
|Revenue||$259.0 million||$231.7 million|
Source: Eldorado Gold Corp.
In the fourth quarter of fiscal 2014, Eldorado reported net income of $13.9 million, or $0.02 per share, compared to a net loss of $687.5 million, or $0.96 per share, in the year-ago period, as its revenue increased 11.8%. These very strong results can be attributed to a 27.2% increase in the amount of gold sold by the company to 203,952 ounces, its total revenue from the sale of gold increasing 20.6% to $244.5 million, and its total cash costs decreasing 3.5% to $557 per ounce, all of which more than offset the negative impact of the realized price of gold decreasing 5.1% to $1,199 per ounce during the quarter.
Here’s a quick breakdown of eight other important statistics from the report compared to the year-ago period:
- Total gold production increased 18.2% to 199,572 ounces
- Cash operating cost decreased 4% to $505 per ounce
- Gross profit from gold mining operations increased 9.9% to $84.5 million
- Cash flow from operating activities increased 47.5% to $77.3 million
- Total assets increased 2.2% to $7.39 billion
- Total shareholder equity increased 1% to $5.27 billion
- Ended the quarter with $876.3 million in total liquidity, a decrease of 12.3%
- Ended the quarter with $501.3 million in cash, a decrease of 19.7%
Eldorado also provided its outlook on fiscal 2015, calling for the production of 640,000-700,000 ounces of gold and total cash operating costs of $570-$615 per ounce.
Should you buy shares of Eldorado Gold today?
Eldorado Gold is one of the leading low-cost gold producers in the world, and increased sales and decreased expenses led it to a very strong fourth-quarter performance, and its stock responded by rising over 3.5%.
Even after the large post-earnings pop in Eldorado’s stock, I think it represents an attractive long-term investment opportunity, because it still trades at low forward valuations, including just 22.3 times fiscal 2015’s estimated earnings per share of $0.29 and a mere 10.6 times fiscal 2016’s estimated earnings per share of $0.61, both of which are very inexpensive compared to its five-year average price-to-earnings multiple of 36.9.
With the inexpensive valuations above in mind, I think Eldorado Gold represents a great long-term investment opportunity. Foolish investors should take a closer look and strongly consider initiating long-term positions today.