Barrick Gold Trading Cheaper Than Industry: Should You Buy the Stock?

Core Viewpoint - Barrick Gold Corporation (GOLD) is currently undervalued compared to its industry peers, with a forward price/earnings ratio of 10.81X, which is approximately 23.7% lower than the Zacks Mining – Gold industry's average of 14.16X, and has a Value Score of A [1][8] Valuation and Stock Performance - GOLD's shares are trading about 19.5% below its 52-week high of $21.35, reached on October 21, 2024 [3] - The stock has been trading below the 200-day simple moving average since November 25, 2024, but surpassed its 50-day simple moving average on January 30, 2025, indicating bullish momentum [5][8] - Over the past year, GOLD's shares have gained 15.9%, underperforming the industry's 48.6% increase and the S&P 500's rise of 22.4% [19] Production Growth Projects - Barrick is advancing key growth projects that are expected to significantly enhance production, including Goldrush, Pueblo Viejo plant expansion, Donlin Gold, Fourmile, Lumwana Super Pit, and Reko Diq [9][10] - The Goldrush mine aims for a production target of 400,000 ounces per annum by 2028, while the Reko Diq project is designed to produce 400,000 tons of copper and 500,000 ounces of gold annually in its second phase [11] Gold Price Dynamics - Gold prices have increased approximately 27% in 2024, driven by strong demand from central banks and geopolitical tensions, with prices reaching a record high of$ 2,882 per ounce on February 5 [13] - The ongoing U.S.-China tariff war is expected to further boost safe-haven demand for gold, supporting its price [13] Financial Health and Dividend - Barrick has a strong liquidity position with cash and cash equivalents around $4.2 billion and generated an operating cash flow of$ 1.18 billion and free cash flow of $444 million by the end of Q3 2024 [14] - The company offers a dividend yield of 2.3% with a payout ratio of 37%, indicating sustainability, and a five-year annualized dividend growth rate of approximately 7% [15] Cost Challenges - Barrick faces challenges from rising production costs, with cash costs per ounce increasing around 21% year-over-year and all-in sustaining costs (AISC) rising roughly 20% in Q3 2024 [16] - For full-year 2024, total cash costs per ounce are projected to be between$ 940- $1,020, and AISC between$ 1,320-$1,420, indicating a year-over-year increase [16] Earnings Estimates - Earnings estimates for Barrick have been revised downward over the past 60 days, with the Zacks Consensus Estimate for 2024 and 2025 being lowered [17] Investment Outlook - Despite the attractive valuation and strong financial health, the high production costs suggest caution for potential investors, recommending a hold strategy for current shareholders [22]