Newmont Corporation: Intrinsic Value 35% Above Share Price

Newmont Corporation (NYSE:NEM), the world's largest gold miner, has seen its stock price underperform in recent months, but a closer look at the company's fundamentals and valuation metrics suggests that its intrinsic value may be significantly higher than its current share price. In this article, we will explore the factors contributing to Newmont's undervaluation and discuss why investors may want to consider adding this stock to their portfolios.

Undervaluation and Growth Prospects

Newmont's stock is currently trading at around $41.65, but analysts have set an average target price of $54.00, indicating a potential upside of 29.65%. This discrepancy between the current share price and the target price suggests that Newmont may be undervalued. Additionally, Newmont's stock has a low valuation compared to its peers in the mining sector, with a P/E ratio of around 13.00, an EV/EBITDA ratio of around 3.08, and a P/B ratio of around 2.00.

Newmont's undervaluation can be attributed to several factors, including its recent underperformance, geopolitical risks, and concerns about its dividend yield. However, the company's strong fundamentals, such as its leading position in the gold mining industry, robust cash flow, and attractive valuation metrics, suggest that Newmont's stock may be an attractive investment opportunity.

Dividend Yield and Growth Prospects

Newmont has an attractive dividend yield of 2.4%, but some investors may be concerned about the dividend's sustainability, as it is not well-covered by earnings or free cash flows. However, Newmont's dividend framework, which includes an annualized $1.00 per share sustainable base dividend with additional returns at higher gold prices, allows the company to continue investing in profitable, organic growth while simultaneously returning cash to shareholders.

Newmont's growth prospects are supported by its outlook for increasing gold production and ongoing investment in its operating assets and most promising growth prospects, such as Ahafo North and Yanacocha Sulfides. These projects are expected to reach execution stage in 2021, contributing to the company's long-term growth.

Valuation and Investment Thesis

Newmont's intrinsic value, as calculated using the Discounted Cash Flows (Growth Exit 5Y) model, is around $14.39, which is significantly lower than its current share price of $41.65. This discrepancy suggests that Newmont's stock may be undervalued by around 134.50%. However, it is essential to note that the result may not be accurate due to the invalid valuation result of the DCF model.

Investors who are willing to look beyond Newmont's recent underperformance and geopolitical risks may find the company's attractive valuation, strong fundamentals, and growth prospects compelling. Newmont's undervaluation, combined with its dividend yield and growth prospects, makes it an attractive investment opportunity for yield-oriented investors seeking exposure to the mining sector.



In conclusion, Newmont Corporation's intrinsic value may be as much as 35% above its current share price, making it an attractive investment opportunity for yield-oriented investors seeking exposure to the mining sector. Despite recent underperformance and geopolitical risks, Newmont's strong fundamentals, attractive valuation, and growth prospects make it a compelling investment case. Investors should carefully consider these factors and conduct thorough due diligence before making an investment decision.