From Globe and Mail: Wednesday’s TSX breakouts On today’s TSX Breakouts report, there are 40 stocks on the positive breakouts list (stocks with positive price momentum), of which over one-third are gold stocks, and 26 securities are on the negative breakouts list (stocks with negative price momentum) with a concentration of energy stocks.
Discussed today is a gold stock that is on the positive breakouts list - B2Gold Corp. (
). The stock has 14 buy recommendations and a 42-per-cent expected one-year return.
A brief outline is provided below that may serve as a springboard for further fundamental research when conducting your own due diligence.
The company
Headquartered in Vancouver, B2Gold is a gold producer with three operating mines - Fekola in Mali, Masbate in the Philippines and Otjikoto in Namibia).
B2GOLD CORP
5.03+0.19 (3.93%)
PAST YEAR
Quarterly earnings and outlook
After the market closed on Nov. 1, the company reported disappointing third-quarter financial results. The company reported adjusted earnings per share of 3 US cents, below the consensus estimate of 7 US cents. Cash flow per share came in at 13 US cents, in-line with the Street’s forecast. Gold production was 227,016 ounces. Consolidated all-in sustaining costs (AISC) were US$1,169 per ounce. The company has a strong balance sheet with US $549-million in cash and cash equivalents at quarter-end.
Management reiterated its production outlook. For 2022, management anticipates consolidated gold production will be between 990,000 ounces and 1,050,000 ounces, the bulk of which will come from the Fekola Mine. Gold production from Fekola is anticipated to be between 570,000 ounces and 6000,000 ounces. Masbate is expected to produce between 215,000 ounces and 225,000 ounces of gold. Finally, at Otjiko, management is guiding to producing between 165,000 ounces and 175,000 ounces of gold. The consolidated AISC is forecast to be between US$1,010 and US$1,050 per ounce.
Dividend policy
The company pays its shareholders a quarterly dividend of 4 US cents per share, or 16 US cents per share yearly, equating to a current annualized yield of over 4 per cent.
The dividend has been maintained at this level since 2020.
Analysts’ recommendations
This mid-cap stock is well covered by analysts. Since the company released its third-quarter financial results at the beginning of November, 16 analysts that have issued reports, of which 14 analysts have buy-equivalent recommendations and two analysts have neutral recommendations.
The firms providing recent research coverage on the company are as follows in alphabetical order: BMO Nesbitt Burns, Canaccord Genuity, CIBC World Markets, Cormark Securities, Eight Capital, Haywood Securities, ISS-EVA, M Partners, National Bank Financial, PI Financial, Raymond James, RBC Dominion Securities, Scotiabank, Stifel Canada, TD Securities, and Zacks.
Revised recommendations
After the company reported its quarterly earnings results in November, several analysts revised their expectations. They include:
- BMO’s Brian Quast increased his target price to $7.50 from $7.
- National Bank’s Don Demarco reduced his target price to $6.75 from $7.
- Stifel’s Ingrid Rico trimmed her target price to $7 from $7.25.
Financial forecasts
The Street is forecasting earnings per share of 26 US cents in 2022 and 33 US cents in 2023. Cash flow per share is anticipated to come in at 64 US cents in 2022, rising to 74 US cents in 2023.
Earnings expectations have moderated in recent months. Four months ago, the Street was forecasting earnings per share of 34 US cents for 2022 and 35 US cents for 2023. Cash flow per share was expected to come in at 70 US cents in 2022 and 76 US cents in 2023.
Valuation
The stock is commonly valued on a price-to-net asset value basis and on a price-to-cash flow basis.
According to Bloomberg, the stock trades at a price-to-cash flow multiple of 5 times the 2023 consensus estimate, below its five-year historical average of 6.2 times.
The average one-year target price is $7.15, suggesting the share price has approximately 42-per-cent upside potential over the next 12 months. Individual target prices: $5 (from Zacks), two at $6, $6.50, $6.70, $6.75, US$5, $7, $7.25, $7.45, three at $7.50, $8.50, and $10.50 (from Ben Pirie at M Partners).
Insider transaction activity
Since the beginning of the fourth quarter of 2022, only one insider has reported trading activity in the public market.
On Nov. 17, Peter Montano, vice-president – Projects, sold 12,394 shares at a price per share of $4.44, after which this particular account did not hold any shares.
Chart watch
Looking at key technical resistance and support levels, the stock price is sitting near an initial ceiling of resistance around $5 and $5.15. After that, there is a major resistance around $6. There is downside support around $4.50, close to its 50-day moving average (at $4.57). Failing that, there is strong support around $4.
ESG Risk Rating
According to risk provider Sustainalytics, B2Gold has an environmental, social and governance (ESG) risk score of 29.8 as of Jan. 4. A risk score of between 20 and 30 reflects a “medium risk” rating.