Valued at a market cap of $39 billion, Barrick Gold (TSX:ABX) is among the largest gold mining companies globally. Armed with an extensive portfolio of tier-one gold and copper assets, Barrick Gold may help diversify your portfolio, especially if markets turn turbulent in 2025.
Gold is viewed as a hedge against inflation and a store of value. Over the years, the precious metal has delivered inflation-beating returns to shareholders. Moreover, an inverse relation with other asset classes makes gold an ideal choice amid a challenging and volatile macro backdrop.
Investors may also consider investing in companies like Barrick Gold that mine the yellow metal. So, let’s dive deep into whether this TSX mining stock deserves a place in your portfolio for 2025.
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Is Barrick Gold stock a good investment in 2025?
Shares of Barrick Gold have returned 76% to shareholders in the past decade after adjusting for dividend reinvestments, trailing the broader markets significantly. While gold prices have surged around 30% in the last year, Barrick Gold stock is down almost 12%.
In the third quarter (Q3) of 2024, Barrick Gold increased adjusted earnings per share by 25% year over year to US$0.30. Its operating cash flow grew by 5% year over year to US$1.18 billion, while free cash flow touched a three-year high of US$444 million in Q3, up 24% from the year-ago period.
Barrick Gold allocated around US$700 million towards capital expenditure and reduced its net debt by 27% to US$500 million in the last three months. The company stated that gold production remained steady at 943,000 ounces in Q3 compared to 948,000 ounces in Q2.
Barrick Gold emphasized several growth projects made notable progress in Q3. For instance, the expansion of the Pueblo Viejo plant saw improved performance with a 23% increase in quarterly production and lower unit costs.
Is ABX stock undervalued?
Barrick Gold’s massive scale means it operates across multiple continents. In 2023, it spent more than US$8 billion across 8,050 suppliers, showcasing the complexity of its operations. While commodity prices have largely returned to pre-COVID-19 levels, Barrick Gold continues to focus on cost savings through contract restructuring and leveraging its buying power.
Moreover, its inventory management controls have helped it reduce its inventory of mine supplies by 20% since 2019, driving profit margins higher.
Barrick Gold projects operating cash flow to touch US$3.7 billion in 2024, while capital expenditures are estimated at US$3 billion. Analysts tracking ABX stock expect free cash flow to improve from US$646 million in 2023 to US$2.5 billion in 2026. If ABX stock is priced at 20 times trailing FCF, it should gain another 60% over the next two years.
A widening cash flow base should enable the mining heavyweight to raise dividends, lower balance sheet debt, and reinvest in accretive acquisitions. Barrick Gold currently pays shareholders an annual dividend of US$0.4 per share, which translates to a yield of 2.6%.
Wall Street expects Barrick Gold’s adjusted earnings to touch US$1.85 per share in 2025. Priced at 8.4 times forward earnings, ABX stock is relatively cheap given its growth estimates. Analysts remain bullish and expect the TSX stock to gain around 50% over the next 12 months, given consensus price targets.
