Is Kinross Gold Stock a Good Buy?

Kinross (TSX:K) stock has certainly been showing strength lately, but is it enough to bring investors on board?

Amy Legate-Wolfe

Author Bio Amy became interested in investing in 2018 after having her first daughter. After receiving a masters degree in journalism from Western University, she became frustrated that the finance industry remained a confusing place for Canadians like her: new parents, millennials, and other young people who needed to understand their finances. Now, Amy focuses on tech companies and renewable energy for growth opportunities, coupling that with long-term investing strategies and equities. She also provides investors with a daily newsletter, Canada Stock Digest, for daily market updates. Her work can also be found at Canada's National Observer, where she writes on the business side of climate action. Before joining Motley Fool Canada, Amy wrote for major news organizations including HuffPost, CTVNews.ca, and CBC. When she’s not researching investing strategies, Amy’s time is pretty much monopolized by her two wild daughters, but in what little spare time she has she loves to do yoga, go on walks with her dog, and travel with her husband. Social Media Follow Amy on LinkedIn and Canada Stock Digest. Favorite Investment Quote “October: This is one of the particularly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.” – Mark Twain

Published December 2, 2024 9:45 pm EST

Kinross Gold (TSX: K) has been delivering solid performance lately, making it an intriguing option for investors eyeing the gold mining sector. But is it enough for investors to consider Kinross stock as a long-term buy? Let’s dive in.

Safety helmets and gloves hang from a rack on a mining site. — Source: Getty Images

Recent performance

The company’s third-quarter 2024 results showcased a 30% year-over-year revenue increase to $1.43 billion, driven by a 28% rise in the average realized gold price to $2,477 per ounce. Earnings per share doubled to $0.24 compared to $0.12 in the same quarter last year. These results highlight the company’s ability to capitalize on favourable gold prices while maintaining efficient operations.

Over the past five years, Kinross stock has demonstrated impressive resilience, with a total return of 161%. This significant growth has outpaced many of its industry peers, solidifying its reputation as a reliable performer in the mining sector. Historical success like this can provide confidence in its long-term prospects, especially when combined with the company’s strategic focus on high-margin projects and cost-efficient mining operations.

Considerations

Kinross stock has also maintained its appeal through dividends, offering consistent payouts to shareholders. The company’s current dividend yield is around 1.19%, supported by a healthy payout ratio of just under 20%. This conservative approach ensures that dividends are sustainable even during periods of price volatility in the gold market, making it an attractive feature for income-focused investors.

However, a recent insider transaction has raised some eyebrows. In November 2024, Chief Executive Officer Jonathan Paul Rollinson sold 1.5 million shares, amounting to $21 million. Insider selling can sometimes signal concern, though it’s important to consider that executives often sell shares for personal financial reasons unrelated to company performance. While this sale doesn’t necessarily spell trouble, it’s worth monitoring.

Valuation metrics further support the case for Kinross stock as a reasonably priced stock. With a price-to-earnings (P/E) ratio of 16.12, the company is trading below the industry average, suggesting potential value for investors. The price-to-book (P/B) ratio of 1.95 indicates the stock is not overpriced relative to its book value, appealing to those with a value-oriented investment strategy.

Future outlook

Looking ahead, Kinross stock is poised for continued growth, with earnings expected to rise by 25.71% over the next year. This anticipated increase from $0.70 to $0.88 per share reflects confidence in the company’s ability to deliver strong results amid robust gold prices. Plus, Kinross stock’s free cash flow generation offers flexibility for reinvestment or further shareholder returns.

The gold industry as a whole has been experiencing a surge, with prices hitting record highs. This trend benefits miners like Kinross, boosting profitability and drawing increased investor interest. The company’s positioning in this favourable environment adds to its allure as a long-term investment.

That said, investing in Kinross stock is not without risks. Gold prices are notoriously volatile, influenced by macroeconomic factors and geopolitical events. Operational challenges and potential regulatory hurdles also present uncertainties. Investors should weigh these risks alongside the company’s strengths to ensure they align with their financial goals and risk tolerance.

Bottom line

Overall, Kinross stock stands out as a strong contender for investors seeking exposure to the gold market. Its impressive recent performance, reasonable valuation, and dividend reliability make it an appealing choice. However, as with any investment, it’s crucial to stay informed and consider the broader market dynamics before making a decision.