Eldorado Gold Corp. (TSX: ELD)(NYSE: EGO), one of the world’s leading low-cost gold producers, announced first-quarter earnings results after the market closed on April 30 and its stock responded by rising over 2% in the trading session that followed. Even after this slight rally, Eldorado’s stock still sits more than 36% below its 52-week high, so let’s take a closer look at the results to determine if we should consider initiating long-term positions today, or if we should look elsewhere for an investment instead.
The results that sent its shares higher
Here’s a summary of Eldorado’s first-quarter earnings results compared with what analysts had anticipated and its results in the same period a year ago. All figures are in U.S. dollars.
| Metric | Reported | Expected | Year-Ago |
| Earnings Per Share | $0.03 | $0.02 | $0.05 |
| Revenue | $238.31 million | $226.10 million | $279.87 million |
Source: Eldorado Gold Corp.
Eldorado’s adjusted earnings per share decreased 40% and its revenue decreased 14.8% compared with the first quarter of fiscal 2014. The company’s steep decline in earnings per share can be attributed to its adjusted net income decreasing 47.7% to $19.5 million, led lower by $10.24 million in foreign exchange losses and $499 million in mine standby costs.
Its double-digit percentage decline in revenue can be attributed to two primary factors. First, Eldorado sold just 181,820 ounces of gold during the quarter, a decrease of 4.6% from the year-ago period. Second, the average realized price of gold decreased 5.2% year over year to $1,232 per ounce. These two factors led to its total gold sales decreasing 9.5% to $224 million.
Here’s a quick breakdown of six other notable statistics from the report compared with the year-ago period:
- Gold produced decreased 3.6% to 189,414 ounces
- All-in sustaining cash costs decreased 7.3% to $729 per ounce of gold
- Gross profit from gold mining operations decreased 20.4% to $77.1 million
- Operating profit decreased 58.8% to $30.41 million
- Cash flow from operating activities before changes in non-cash working capital decreased 37.8% to $58.9 million
- Ended the quarter with $445.61 million in cash and cash equivalents, a decrease of 10.6% from the beginning of the quarter
Should you buy Eldorado Gold today?
Even though I do not think the post-earnings pop in Eldorado’s stock was warranted, I do think it represents an intriguing long-term investment opportunity today. I think this because it trades at favourable forward valuations, including just 30.8 times next year’s estimated earnings per share of $0.20, which is very inexpensive compared with its five-year average price-to-earnings multiple of 36.9.
I think Eldorado’s stock could consistently command a fair multiple of at least 35, which would place its shares upwards of $7 by the conclusion of fiscal 2016, representing upside of more than 13.5% from current levels.
With all of the information provided above in mind, I think Eldorado Gold represents a great long-term investment opportunity today. All Foolish investors should take a closer look and consider initiating positions.
