Unveiling Iamgold (IAG)'s Value: Is It Really Priced Right? A Comprehensive Guide
Iamgold Corp (NYSE:IAG) has experienced a daily gain of 6.28%, contrasting with a 3-month loss of -12.89%. The company's Earnings Per Share (EPS) stands at 0.03. So, is Iamgold (NYSE:IAG) modestly overvalued? This article delves into a comprehensive valuation analysis of Iamgold, offering insights into its intrinsic value and market position.
Company Introduction
Iamgold Corp is a mid-tier gold mining company with operations in North America, South America, and West Africa. The company is developing potential mining districts that encompass operating mines, construction, development, and exploration projects. Iamgold's operating mines include Essakane in Burkina Faso, Rosebel in Suriname, and Westwood in Canada. The company's strategic assets are complemented by the Cote Gold construction project in Canada, the Boto Gold development project in Senegal, as well as greenfield and brownfield exploration projects in the Americas and West Africa. With a current stock price of $2.54 and a GF Value of $2.18, the company appears to be modestly overvalued.
Understanding GF Value
The GF Value is an estimation of a stock's intrinsic value, calculated based on historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. The GF Value Line on our summary page provides an overview of the fair value at which the stock should ideally be traded. If the stock price is significantly above the GF Value Line, it is overvalued, and its future return is likely to be poor. Conversely, if it is significantly below the GF Value Line, its future return will likely be higher.
According to GuruFocus Value calculation, Iamgold (NYSE:IAG) is believed to be modestly overvalued. With a current price of $2.54 per share and a market cap of $1.20 billion, the future return of Iamgold's stock is likely to be lower than its business growth due to its relative overvaluation.
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Financial Strength
Companies with poor financial strength pose a high risk of permanent capital loss to investors. To avoid this, it's crucial to review a company's financial strength before deciding to purchase shares. Key indicators of financial strength include a company's cash-to-debt ratio and interest coverage. Iamgold's cash-to-debt ratio of 0.77 ranks worse than 74.51% of 2597 companies in the Metals & Mining industry. The overall financial strength of Iamgold is 5 out of 10, indicating fair financial strength.
Profitability and Growth
Investing in profitable companies carries less risk. Iamgold has been profitable 3 years over the past 10 years. During the past 12 months, the company had revenues of $733.20 million and Earnings Per Share (EPS) of $0.03. Its operating margin of 1.1% is worse than 52.36% of 848 companies in the Metals & Mining industry. Overall, GuruFocus ranks Iamgold's profitability as poor.
Growth is a critical factor in the valuation of a company. The 3-year average annual revenue growth of Iamgold is -3.2%, which ranks worse than 78.05% of 606 companies in the Metals & Mining industry. The 3-year average EBITDA growth rate is 0%, which ranks worse than 0% of 1857 companies in the Metals & Mining industry.
ROIC vs WACC
Return on invested capital (ROIC) measures how well a company generates cash flow relative to the capital it has invested in its business. The weighted average cost of capital (WACC) is the rate that a company is expected to pay on average to all its security holders to finance its assets. Iamgold's return on invested capital is 0.1, and its cost of capital is 7.61.
Conclusion
In summary, the stock of Iamgold (NYSE:IAG) is believed to be modestly overvalued. The company's financial condition is fair, and its profitability is poor. Its growth ranks worse than 0% of 1857 companies in the Metals & Mining industry. To learn more about Iamgold stock, you can check out its 30-Year Financials here.
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This article first appeared on GuruFocus.
