Is Eldorado Gold Corp. the Top Gold Stock to Own Today?

Eldorado Gold Corp. (TSX:ELD)(NYSE:EGO) released fourth-quarter earnings on February 19 and its stock has responded by rising over 3.5%. Is now the time to buy?

| More on:

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:

  1. Total gold production increased 18.2% to 199,572 ounces
  2. Cash operating cost decreased 4% to $505 per ounce
  3. Gross profit from gold mining operations increased 9.9% to $84.5 million
  4. Cash flow from operating activities increased 47.5% to $77.3 million
  5. Total assets increased 2.2% to $7.39 billion
  6. Total shareholder equity increased 1% to $5.27 billion
  7. Ended the quarter with $876.3 million in total liquidity, a decrease of 12.3%
  8. 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.

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.

More on Investing