Have Investors Priced In New Gold Inc’s (TSE:NGD) Growth?
New Gold Inc (TSX:NGD), a metals and mining company based in Canada, saw significant share price volatility over the past couple of months on the TSX, rising to the highs of CA$3.72 and falling to the lows of CA$2.85. This high level of volatility gives investors the opportunity to enter into the stock, and potentially buy at an artificially low price. A question to answer is whether New Gold’s current trading price of CA$3.1 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at New Gold’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change. See our latest analysis for New Gold
What is New Gold worth?
New Gold appears to be overvalued by 72% at the moment, based on my discounted cash flow valuation. The stock is currently priced at CA$3.10 on the market compared to my intrinsic value of CA$1.79. This means that the buying opportunity has probably disappeared for now. If you like the stock, you may want to keep an eye out for a potential price decline in the future. Since New Gold’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.
What does the future of New Gold look like?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company’s future expectations. In New Gold’s case, its revenues over the next few years are expected to grow by 45.55%, indicating a highly optimistic future ahead. If expense does not increase by the same rate, or higher, this top line growth should lead to stronger cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? It seems like the market has well and truly priced in NGD’s positive outlook, with shares trading above its fair value. At this current price, shareholders may be asking a different question – should I sell? If you believe NGD should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping an eye on NGD for a while, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the optimistic prospect is encouraging for NGD, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on New Gold. You can find everything you need to know about New Gold in the latest infographic research report. If you are no longer interested in New Gold, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.
