Equinox Gold Corp (EQX, Financial) recently posted a daily gain of 3.38%, and a three-month gain of 7.11%. With an Earnings Per Share (EPS) of 0.04, the question arises: is the stock modestly undervalued? To answer this, we delve into a comprehensive valuation analysis of Equinox Gold. Let's explore.
Company Overview
Equinox Gold Corp is a mining company engaged in the operation, acquisition, exploration, and development of mineral properties, with a particular focus on gold. Boasting around seven operating gold mines, Equinox Gold has a clear plan to increase production by advancing a pipeline of growth projects. The company's stock price is currently $5.14, while the estimated fair value (GF Value) stands at $6.49, suggesting potential undervaluation.
Understanding GF Value
The GF Value is an intrinsic value estimate derived from a proprietary method. It considers historical multiples, an adjustment factor based on past returns and growth, and future business performance estimates. The GF Value Line on our summary page provides an overview of the stock's fair trading value.
Equinox Gold (EQX, Financial) appears to be modestly undervalued based on our valuation method. The GF Value estimates the stock's fair value based on historical multiples, internal adjustment based on past business growth, and analyst estimates of future business performance. If the share price is significantly above the GF Value Line, the stock may be overvalued, and future returns may be poor. Conversely, if the share price is significantly below the GF Value Line, the stock may be undervalued, and future returns may be higher. At its current price of $5.14 per share, Equinox Gold appears to be modestly undervalued.
Given that Equinox Gold is relatively undervalued, the long-term return of its stock is likely to be higher than its business growth.
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Financial Strength
Investing in companies with poor financial strength carries a higher risk of permanent capital loss. Therefore, it's crucial to assess a company's financial strength before investing. Equinox Gold's cash-to-debt ratio stands at 0.35, which is worse than 82.71% of companies in the Metals & Mining industry. This suggests that Equinox Gold's financial strength is fair.
Profitability and Growth
Investing in profitable companies carries less risk. Equinox Gold has been profitable for 2 years over the past decade. Its operating margin of 1.63% is worse than 50.59% of companies in the Metals & Mining industry, suggesting poor profitability.
Growth is a crucial factor in a company's valuation. Equinox Gold's average annual revenue growth is 8.7%, ranking worse than 57.1% of companies in the Metals & Mining industry. The 3-year average EBITDA growth is 4.6%, which ranks worse than 58.32% of companies in the industry.
ROIC vs WACC
Another measure of profitability is comparing a company's return on invested capital (ROIC) and the weighted average cost of capital (WACC). ROIC measures how well a company generates cash flow relative to the capital it has invested in its business. The WACC is the rate that a company is expected to pay on average to all its security holders to finance its assets. For the past 12 months, Equinox Gold's ROIC is -0.38, and its WACC is 9.07.
Conclusion
Overall, Equinox Gold (EQX, Financial) stock appears to be modestly undervalued. The company's financial condition is fair, and its profitability is poor. Its growth ranks worse than 58.32% of companies in the Metals & Mining industry. To learn more about Equinox Gold stock, you can check out its 30-Year Financials here.
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