OceanaGold Corp Falls
- By Alberto Abaterusso
The market was not enthusiastic about OceanaGold Corporation's (OGC.TO) guidance on production and costs for 2018. The stock fell sharply, nearly 4%, on Friday and closed at $2.52 per share on the Toronto Stock Exchange.
OceanaGold Corp is now trading with a market capitalization of $1.55 billion with a price-book (P/B) ratio of 1.11 and an EV-to-Ebitda of 7.09. With reference to the first ratio, it looks like OceanaGold Corp is trading cheaply since the industry has an average of 1.68 times. But with reference to the EV-to Ebitda ratio, the stock is 3.6 times higher than the industry.
Warning! GuruFocus has detected 3 Warning Signs with TSX:OGC. Click here to check it out.
The intrinsic value of TSX:OGC
The stock is trading only 17 cents above the 52-week low of $2.35 and nearly 60% below the 52-week high of $4.02 per share. According to the Yahoo Finance's chart, OceanaGold Corp is trading below the 200, 100 and 50-SMA lines:
Source: Yahoo Finance
Let's have a look at the company's expectations on production and costs for the current year. The yellow metal output is expected to be 480,000 to 530,000 ounces on a consolidated basis while it is predicted that it will milk about 15,500 tons of copper from its resources.
The all-in sustaining cost is forecasted to range between $725 and $775 per ounce of metal sold.
As of Monday, OceanaGold Corp had a recommendation rating of 1.8 out of a total of 5. This means that analysts see this stock as a buy for 2018. With an average target price of $3.48, a mean of twelve $2.41 to $4.74 ranging estimates, OceanaGold Corp may appreciate 38.3% within the following 52 weeks of trading.
With an Ebitda margin (ttm) of nearly 50% and about 27% higher than the industry, this stock has proven over the last 12 trading months to outperform its peers. With precious and base metals predicted to soar in 2018, it should be a solid year for investors of OceanaGold Corp. The stock at its current price represents an opportunity investors should not miss.
However, we need some factors to justify expectations of OceanaGold. The miner expects to deliver another solid year in terms of production growth at Macraes mine, which accounts for about 38% of the total production, as well as at Haile Gold Mine. The Haile Gold mine accounts for 28-29% of OceanaGold Corp's consolidated output. The company expects to deliver a significant benefit from operational enhancements at Didipio and from expansion plans advancement at Waihi mine.
(Disclosure:I have no positions in any security mentioned in this article.)
This article first appeared on GuruFocus.
Warning! GuruFocus has detected 3 Warning Signs with TSX:OGC. Click here to check it out.
The intrinsic value of TSX:OGC
