One top gold producer that really doesn’t get the love or attention it should is Endeavour Mining (TSX:EDV).
There are some reasons for this, from the company’s size (market capitalization around $10 billion) relative to other big players in this space, and better returns seen elsewhere in the mining sector over the past year.
That said, with a one-year return of more than 60%, those who have invested in EDV stock have seen material returns, and the stock chart above is worth paying attention to. Let’s dive into whether this momentum can continue.
Source: Getty Images
Let’s dive into the numbers
Overall, Endeavour (like most mining operators) has seen impressive financial performance of late. Given the company’s size and scale in the gold mining industry, the company’s stock price movement certainly jives with the company’s underlying fundamentals, which have continued to improve.
With a strong cash flow of 66% on a quarter-over-quarter basis (to $592 million), this stock looks very attractively priced at around 20-times operating cash flow. And while earnings have fluctuated somewhat over the past year (this stock trades around 36-times trailing earnings at the time of writing), Endeavour’s most recent results suggest that plenty of capital appreciation could be on the horizon, should investors choose to look at cash flow as their primary metric (I do, personally).
With EBITDA surging more than 200% year over year in the first half, Endeavour looks well-positioned to continue to invest in its Assafou project and other exploration efforts. As the company continues to build its resource base, this is an overlooked stock in the gold mining space, I think, that is worth considering.
Is now the time to invest?
What’s interesting is that even after Endeavour’s impressive recent run, the stock still looks cheap. Of course, forecasting where gold prices will be a year or five years down the road is a difficult task. Indeed, many in the market appear to be placing their bets that eventually gold-related stocks will see a decline as prices normalize.
My view is that if we continue to see dollar volatility and inflation risks persist, gold and gold miners should be a solid place to put at least a small portion of one’s portfolio to work. For those with this viewpoint, Endeavour Mining seems like an intriguing option at current levels.
