Stock Valuation: New Gold Inc (NGD)

Name of Company Country of Origin/ Exchange Traded Sector Stock Price
NEW GOLD INC Canada/
TSX
Basic Materials – Metals & Mining – Gold CAD1.28
@ 14 Sep 2018
COMPANY PROFILE New Gold Inc is an intermediate gold mining company. The firm is engaged in the acquisition, exploration, and development of natural resource properties.

New Gold Inc is an intermediate gold mining company with operations across various parts of the globe. The company has a portfolio of four producing assets, including the New Afton Mine in Canada, the Mesquite Mine in the United States, the Peak Mines in Australia, and the Cerro San Pedro Mine in Mexico. In addition, New Gold New Gold owns 100% of the Rainy River and Blackwater projects, which are both located in Canada, along with a minority stake in the gold stream on the El Morro project located in Chile. The New Afron Mine is the largest division, contributing roughly 40% of group revenue.

Stock Code NGD
Valuation Analysis Below

New Gold PE

The Price Earnings (PE) Ratio is the most frequently used valuation indicator for a stock. However, there are times when this ratio cannot be used e.g. when the company reports a loss or profit is so minimal that it results in an abnormally high PE Ratio. Or Net Profit After Tax may be volatile and it is better to use Earnings Before Interest and Tax (EBIT) to value the company. We use the PE Band or Market Cap/EBIT Band to show whether a stock is overvalued or undervalued based on its historical valuation.
Current Price to Earnings ratio is not available e.g. when earnings is negative or estimates are not available.
Is this stock undervalued or overvalued? One should not just look at one indicator to determine the fair value of a stock.
ProThinker believes in using a combination of valuation methods to decide whether a stock is over or undervalued? The five ratios we use are Price to Earnings, Price to Sales, Price to Cash Flow, Price to Book and Dividend Yield. We use multiple methods to value a stock because each has its benefits as well as shortcomings. Price to Earnings and Price to Cash Flow Ratios relate stock price to profitability but are meaningless when the comany has negative earnings or cash flows. Price to Sales Ratio is more stable because sales are never negative. However, this does not tell us whether the company is able to sell profitably. Price to Book Ratio gives us an indication as to how much we are paying for the company’s assets but it is not directly related to the company’s profitability. Dividend Yield cannot be used for companies that are paying little to no dividends.
While it is important to value stocks based on multiple valuation methods, this often leads to differing views on valuation. One indicator may suggest that a stock is overvalued while another suggest that it is undervalued. This does not help an investor who needs to make a definite decision whether to buy, hold or sell the stock. That is why we advocate the use of a Composite Valuation Indicator, which is derived from the best combination of the five indicators above. A Composite Valuation Indicator will give you ONE conclusion on whether a stock is under or over valued.
To find out more about our valuation methodology, click here. 
Source of Data: Company description, historical financial statements data and price data are from gurufocus.com or moneycontrol.com. Estimates are from marketscreener.com – Thomson Reuters.
Disclaimer: This report is for information purposes only and should not be considered a solicitation to buy or sell any security. Neither ProThinker nor any other party guarantees its accuracy or makes warranties regarding results from its usage. Redistribution is prohibited without the express written consent of ProThinker. Copyright(c) 2018. All rights reserved.

 

Leave a Reply

Your email address will not be published. Required fields are marked *