1 No-Brainer TSX Stock With 73% Upside According to Analysts

These factors could help Torex Gold Resources (TSX:TXG) stock to rally soon.

| More on:

Stocks have staged an outstanding rally this year to reach new heights. The TSX Composite Index has risen by more than 22% to a record high of 21,285 in 2021 so far. While this rally has made most stocks look expensive, some Canadian stocks still look really cheap and attractive. In this article, I’ll highlight one such cheap TSX stock that hasn’t seen any appreciation this year. Interestingly, Bay Street analysts also expect this Canadian stock to post solid gains in the next year.

Torex Gold stock

Torex Gold Resources (TSX:TXG) is a Toronto-based intermediate gold producer with a market cap of about $1.3 billion. The company is currently focusing on the exploration and development of its Mexico-based Morelos Gold property.

While the TSX Composite benchmark is touching new heights with 22% gains this year so far, Torex Gold stock has lost 22% this year so far. It currently trades at around $14.72 per share.

On track to meet 2021 guidance

Earlier this month, Torex Gold Resources announced its third-quarter gold production results. During the quarter, the company produced 111,220 ounces of gold from its El Limón Guajes mining complex in Mexico. Torex’s third-quarter gold output was lower compared to its production in the first and second quarters due to its planned “mining in areas of the pit where grades are closer to reserve levels.” In Q4 as well, the company expects its production to be close to its Q3 levels.

Despite a drop in its Q3 production, it’s still on track to meet the higher end of its 2021 gold production guidance range of 430,000 to 470,000 ounces. Now, let’s look at the recent trends in Torex Gold’s yearly financials to get a better idea for the long term.

In 2020, Torex Gold’s total revenue rose by 23% YoY (year over year) to US$789 million. While this growth rate was significantly lower than its revenue growth rate of over 40% YoY in a previous couple of years, its 2020 revenue was still slightly higher than Street analysts’ expectations.

To add optimism, strengthening gold prices helped the company more than double its bottom line last year, despite COVID-19-related operational challenges. Its 2020 adjusted net profits stood at US$135.7 million compared to the $67.8 million in the previous year.

Similarly, Torex Gold’s profit margins have also expanded significantly in the last couple of years. In 2018, the company reported an adjusted net profit margin of just 4.4%, which expanded to more than 17% in 2020. Analysts expect this expansion trend in its profit margin to continue in the coming years.

Why Torex Gold stock is worth buying now

Despite all these positive factors and its strong financial progress in the last couple of years, Torex Gold stock is still trading 27% lower from its 2019 closing level of $20.52 per share. This justifies why most Bay Street analysts see about 73% upside potential in its stock with a consensus target price of $25.67 per share.

Torex is expected to release its latest quarterly results on Wednesday next week. Investors’ high expectations from its upcoming results and the ongoing rally in gold prices are driving its stock higher this month, as it has already risen by nearly 18% in October. Given its solid growth prospects, it could just be the start of a big long-term rally.

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.

The Motley Fool has no position in any of the stocks mentioned. Fool contributor Jitendra Parashar has no position in any of the stocks mentioned.

More on Metals and Mining Stocks

Start line on the highway
Metals and Mining Stocks

The Smartest Canadian Stock to Buy With Only $300 Right Now

This copper Canadian stock is due for even more growth, making now a great time to pick it up.

Read more »

GettyImages-1394663007
Dividend Stocks

Recession Stocks Are Back: Consider Buying These Canadian Stocks in May

A recession may or may not come, but no matter what's ahead, investors can prepare with these Canadian stocks

Read more »

woman analyze data
Metals and Mining Stocks

1 Magnificent Canadian Stock Down 17% to Buy and Hold Forever

Do you want some value and a deal all wrapped into one? Then this Canadian stock could be for you.

Read more »

Dog smiles with a big gold necklace
Metals and Mining Stocks

The Smartest Materials Stock to Buy With $3,700 Right Now

A top-tier gold miner with a strong foundation for growth is the smartest materials stock to buy today.

Read more »

woman analyze data
Metals and Mining Stocks

Where I’d Invest $6,000 in the TSX Today

Here's why Canadian investors should consider holding shares of undervalued TSX stocks such as Allied Gold right now.

Read more »

nugget gold
Metals and Mining Stocks

Why Kinross Gold Stock Climbed 4% After Earnings

Kinross stock should continue to do well and already has after some stellar earnings.

Read more »

grow money, wealth build
Metals and Mining Stocks

The Smartest Mining Stock to Buy With $5,500 Right Now

Agnico Eagle Mines (TSX:AEM) stock has been hot of late. More gains seem likely for the dividend stock.

Read more »

nugget gold
Metals and Mining Stocks

This TSX Gold Stock Down 46% Looks Incredibly Undervalued

Down 46% from all-time highs, Equinox Gold is an undervalued TSX mining stock that offers you significant upside potential right…

Read more »