Compelling valuation Ttm net income = $34,797,958
Q3 total assets = $132,170,986
Q3 total equity = $ 108,962,606
return on assets =~ 26.32%
return on equity =~ 31.93%
ttm cash flow before changes in non cash:
$39,945,195
Additional info:
P/E ratio = 5.6
P/B ratio = 1.79
what kind of returns can we expect if we hold this stock for 5 years?
I will make several simplified assumptions. The company will continue to earn net income of ~ $35m for the next 5 years. In 5 years, the book value of equity will be ~ $283m.
1) the company shares will trade at a pessimistic 1 times book value. With a market capitalization of ~ $194.97 m, this works out to a 5 year return of 7.73%
2) the company trades at a conservative 1.5 times book value. This works out to a 5-year compounded annual return of 16.83%
3) the company increases its gold mine life or makes additional attractive investments and so now trades at a price to book value of 2 times. In this scenario, the 5-year compounded annual return would be 23.75%
Keep in mind that the company is currently trading at a price to book of 1.79
What if net income increases in future years above the simplified assumptions I've used? In any case, I think the current price is compelling for anyone wishing to add some gold exposure.
A strong buy IMO.