With a daily gain of 11.29%, a 3-month gain of 7.34%, and an Earnings Per Share (EPS) of 0.06, Eldorado Gold Corp (EGO, Financial) has been making significant strides in the stock market. However, the question arises: is the stock modestly overvalued? This article aims to provide a comprehensive analysis of Eldorado Gold's valuation, encouraging readers to delve deeper into the financial intricacies of this gold and base metals producer.
Company Overview
Eldorado Gold Corp is a gold and base metals producer with mining, development, and exploration operations in Turkey, Canada, Greece, and Romania. Its portfolio consists of high-quality assets and long-term partnerships with local communities. Some of its projects include Kisladag, Efemcukuru, Skouries; Perama Hill, and Certej projects. With a current stock price of $11 and a GF Value of $9.72, Eldorado Gold (EGO, Financial) appears to be modestly overvalued. However, to fully understand the company's value, a more profound exploration is needed.
Understanding GF Value
The GF Value is a proprietary measure that represents the current intrinsic value of a stock. It is calculated based on historical multiples, a GuruFocus adjustment factor based on the company's past returns and growth, and future business performance estimates. The GF Value Line gives an overview of the fair value that the stock should be traded at. 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.
Based on the GF Value, Eldorado Gold's stock appears to be modestly overvalued. This suggests that the long-term return of its stock is likely to be lower than its business growth.
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Financial Strength
Investing in companies with poor financial strength has a higher risk of permanent loss of capital. Therefore, it is crucial to review the financial strength of a company before deciding whether to buy its stock. Eldorado Gold has a cash-to-debt ratio of 0.81, which is worse than 73.98% of 2640 companies in the Metals & Mining industry. GuruFocus ranks the overall financial strength of Eldorado Gold at 6 out of 10, indicating fair financial strength.
Profitability and Growth
Investing in profitable companies poses less risk, especially those demonstrating consistent profitability over the long term. Eldorado Gold has been profitable 3 times over the past 10 years. With an operating margin of 9.8%, it ranks better than 71.31% of 868 companies in the Metals & Mining industry. However, the average annual revenue growth of Eldorado Gold is 8.7%, which ranks worse than 57.31% of 595 companies in the same industry. The 3-year average EBITDA growth is -5.6%, ranking worse than 65.77% of 1852 companies in the Metals & Mining industry.
ROIC vs WACC
Comparing a company's return on invested capital (ROIC) to the weighted average cost of capital (WACC) is another way of determining its profitability. When the ROIC is higher than the WACC, it implies the company is creating value for shareholders. For the past 12 months, Eldorado Gold's ROIC is 1.92, and its WACC is 7.39.
Conclusion
In conclusion, Eldorado Gold (EGO, Financial) appears to be modestly overvalued. The company's financial condition and profitability are fair, but its growth ranks worse than 65.77% of 1852 companies in the Metals & Mining industry. For more insights into Eldorado Gold's stock, check out its 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
