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B2Gold Stock Trading Cheaper Than Industry at 6.44x: Buy or Hold?
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From a valuation perspective, the B2Gold Corp (BTG - Free Report) stock remains attractive. The company is trading at a forward price/earnings of 6.44x, lower than the industry's average and 39% below its five-year median. BTG currently has a Value Score of A.
The stock also remains attractively valued compared with its peers like Eldorado Gold (EGO - Free Report) and IAMGOLD (IAG - Free Report) .
Should you consider buying the BTG stock based on its attractive valuation? Let's dig deeper.
Image Source: Zacks Investment Research
B2Gold Lags Industry on Weak Q2 & Trimmed 2024 Outlook
B2Gold’s shares have gained 3.9% in the past three months but underperformed the industry's 15.8% growth.
However, the stock has outperformed the Zacks Basic Materials sector’s decline of 6%. The S&P 500 rose 2.6% in the said timeframe.
BTG's Price Performance Vs Industry, Sector & S&P 500
Image Source: Zacks Investment Research
Looking at BTG’s price movement, we see that it was generally moving in line with the industry until its second-quarter 2024 results on Aug. 8. The stock lost 11% in a day as the market reacted strongly to the weaker-than-expected earnings and B2Gold’s lowered production outlook for 2024.
The company stated that an excavator at its Fekola mine had been damaged during the quarter, which resulted in a 27% production decline at the mine. This incident will delay the mining of higher-grade ore from Phase 7 of the Fekola pit in the second half of 2024. Anticipating a production loss of 50,000 ounces of gold from Fekola, BTG lowered the production outlook for 2024 to 800,000-870,000 ounces.
The stock has recovered and appreciated 9% since the setback buoyed by higher gold prices.
Factors That We Believe Will Boost BTG Stock Further
Fekola Mine & Goose Project to Boost Production in 2025: BTG expects to recoup the above-mentioned lost production at Fekola in the first half of 2025. Also, the company anticipates a significant increase in gold production from the Fekola Complex in 2025. The upside can be attributed to the processing of higher-grade ore from the Fekola and the Cardinal pits and the contribution from Fekola Regional.
B2Gold completed the 2024 Winter Ice Road (WIR) campaign in the second quarter and delivered all necessary items to enable the completion of construction of the Goose Project. It expects the first gold pour from the site in second-quarter 2025.
Upbeat Prospects for Gramalote Project: On June 18, 2024, the company released the results of a positive Preliminary Economic Assessment (PEA) on its 100% owned Gramalote Project in Colombia. The PEA indicates a significant production profile, with an average annual gold production of 185,000 ounces over a 12.5-year life and an after-tax internal rate of return. B2Gold is targeting the completion of a feasibility study by mid-2025.
Springbok Zone to Boost Otjikoto Mine’s Production Profile: On June 20, BTG released an initial mineral resource estimate for Springbok Zone at the Otjikoto Mine in Namibia. The company plans to initiate a PEA on the deposit by underground mining methods. Subject to the receipt of a positive PEA and permit, mining of the Springbok Zone and the exploration potential of the greater Antelope deposit, BTG expects to boost gold production at Otjikoto in 2026.
Solid Rally in Gold Prices: Gold prices have increased 22% year to date and are currently at $2,523 an ounce. The bullion is being supported by expectations of a rate cut in September and geopolitical tensions.
Analysts expect this momentum to continue and are projecting gold prices to scale to around $3,000 an ounce by 2025, backed by solid demand amid limited supply prospects.
Solid Balance Sheet Enables Investment in Growth Projects: Backed by its strong financial position, BTG continues to invest in maximizing production at its existing mines, advancing development and exploration projects and investing in junior exploration companies. BTG’s debt-to-capital ratio was at 0.01 as of June 30, much lower than IAMGOLD’s 0.23 and EGO’s 0.17.
Upward Estimate Trajectory Instill Confidence in BTG Earnings
The Zacks Consensus Estimate for BTG’s 2024 and 2025 earnings have moved up in the past 60 days. The consensus mark for 2024 earnings suggests in-line results compared with 2023 levels. Analysts expect that higher gold prices will offset the impact of the decline in production on BTG’s earnings.
Image Source: Zacks Investment Research
The estimate for 2025 indicates a 73.5% year-over-year increase that will be driven by higher production and prices. The earnings estimate of 48 cents projected for 2025 calls for a CAGR of 26% over the 2022-2025 period.
Image Source: Zacks Investment Research
BTG Offers Industry Leading Dividend Yield & Returns
BTG’s current 6.04% dividend yield is higher than the industry’s 1.70%. The company has a payout ratio of 66.7%, higher than the industry’s 49.4%. It has a five-year dividend growth rate of 24.2%.
B2Gold’s Return on Assets (ROA) is at 6.25%, ahead of the industry’s 4.98%, indicating that the company has been utilizing its assets efficiently to generate returns.
Image Source: Zacks Investment Research
Average Target Price for BTG Suggests a Solid Upside
Based on short-term price targets offered by 13 analysts, the Zacks average price target is at $4.11 per share. The average suggests a potential 55.09% upside from Thursday’s closing price of $2.69.
Image Source: Zacks Investment Research
How Should You Play BTG Stock Now?
While the expected rally in gold prices will support B2Gold’s results in the remaining part of this year, the lower production due to the Fekola incident is concerning. Despite B2Gold’s attractive valuation, new investors should adopt a wait-and-watch approach.
A turnaround is likely next year supported by earnings growth projections and the company’s projects coming online. B2Gold has upside potential backed by its solid growth projects and financial health. The industry-leading dividend yield is another positive. Investors who already own it should retain it in their portfolio. BTG currently carries a Zacks Rank #3 (Hold).
From a valuation perspective, the B2Gold Corp (BTG - Free Report) stock remains attractive. The company is trading at a forward price/earnings of 6.44x, lower than the industry's average and 39% below its five-year median. BTG currently has a Value Score of A.
The stock also remains attractively valued compared with its peers like Eldorado Gold (EGO - Free Report) and IAMGOLD (IAG - Free Report) .
Should you consider buying the BTG stock based on its attractive valuation? Let's dig deeper.
B2Gold Lags Industry on Weak Q2 & Trimmed 2024 Outlook
B2Gold’s shares have gained 3.9% in the past three months but underperformed the industry's 15.8% growth.
However, the stock has outperformed the Zacks Basic Materials sector’s decline of 6%. The S&P 500 rose 2.6% in the said timeframe.
BTG's Price Performance Vs Industry, Sector & S&P 500
Image Source: Zacks Investment Research
Looking at BTG’s price movement, we see that it was generally moving in line with the industry until its second-quarter 2024 results on Aug. 8. The stock lost 11% in a day as the market reacted strongly to the weaker-than-expected earnings and B2Gold’s lowered production outlook for 2024.
The company stated that an excavator at its Fekola mine had been damaged during the quarter, which resulted in a 27% production decline at the mine. This incident will delay the mining of higher-grade ore from Phase 7 of the Fekola pit in the second half of 2024. Anticipating a production loss of 50,000 ounces of gold from Fekola, BTG lowered the production outlook for 2024 to 800,000-870,000 ounces.
The stock has recovered and appreciated 9% since the setback buoyed by higher gold prices.
Factors That We Believe Will Boost BTG Stock Further
Fekola Mine & Goose Project to Boost Production in 2025: BTG expects to recoup the above-mentioned lost production at Fekola in the first half of 2025. Also, the company anticipates a significant increase in gold production from the Fekola Complex in 2025. The upside can be attributed to the processing of higher-grade ore from the Fekola and the Cardinal pits and the contribution from Fekola Regional.
B2Gold completed the 2024 Winter Ice Road (WIR) campaign in the second quarter and delivered all necessary items to enable the completion of construction of the Goose Project. It expects the first gold pour from the site in second-quarter 2025.
Upbeat Prospects for Gramalote Project: On June 18, 2024, the company released the results of a positive Preliminary Economic Assessment (PEA) on its 100% owned Gramalote Project in Colombia. The PEA indicates a significant production profile, with an average annual gold production of 185,000 ounces over a 12.5-year life and an after-tax internal rate of return. B2Gold is targeting the completion of a feasibility study by mid-2025.
Springbok Zone to Boost Otjikoto Mine’s Production Profile: On June 20, BTG released an initial mineral resource estimate for Springbok Zone at the Otjikoto Mine in Namibia. The company plans to initiate a PEA on the deposit by underground mining methods. Subject to the receipt of a positive PEA and permit, mining of the Springbok Zone and the exploration potential of the greater Antelope deposit, BTG expects to boost gold production at Otjikoto in 2026.
Solid Rally in Gold Prices: Gold prices have increased 22% year to date and are currently at $2,523 an ounce. The bullion is being supported by expectations of a rate cut in September and geopolitical tensions.
Analysts expect this momentum to continue and are projecting gold prices to scale to around $3,000 an ounce by 2025, backed by solid demand amid limited supply prospects.
Solid Balance Sheet Enables Investment in Growth Projects: Backed by its strong financial position, BTG continues to invest in maximizing production at its existing mines, advancing development and exploration projects and investing in junior exploration companies. BTG’s debt-to-capital ratio was at 0.01 as of June 30, much lower than IAMGOLD’s 0.23 and EGO’s 0.17.
Upward Estimate Trajectory Instill Confidence in BTG Earnings
The Zacks Consensus Estimate for BTG’s 2024 and 2025 earnings have moved up in the past 60 days. The consensus mark for 2024 earnings suggests in-line results compared with 2023 levels. Analysts expect that higher gold prices will offset the impact of the decline in production on BTG’s earnings.
Image Source: Zacks Investment Research
The estimate for 2025 indicates a 73.5% year-over-year increase that will be driven by higher production and prices. The earnings estimate of 48 cents projected for 2025 calls for a CAGR of 26% over the 2022-2025 period.
Image Source: Zacks Investment Research
BTG Offers Industry Leading Dividend Yield & Returns
BTG’s current 6.04% dividend yield is higher than the industry’s 1.70%. The company has a payout ratio of 66.7%, higher than the industry’s 49.4%. It has a five-year dividend growth rate of 24.2%.
B2Gold’s Return on Assets (ROA) is at 6.25%, ahead of the industry’s 4.98%, indicating that the company has been utilizing its assets efficiently to generate returns.
Image Source: Zacks Investment Research
Average Target Price for BTG Suggests a Solid Upside
Based on short-term price targets offered by 13 analysts, the Zacks average price target is at $4.11 per share. The average suggests a potential 55.09% upside from Thursday’s closing price of $2.69.
Image Source: Zacks Investment Research
How Should You Play BTG Stock Now?
While the expected rally in gold prices will support B2Gold’s results in the remaining part of this year, the lower production due to the Fekola incident is concerning. Despite B2Gold’s attractive valuation, new investors should adopt a wait-and-watch approach.
A turnaround is likely next year supported by earnings growth projections and the company’s projects coming online. B2Gold has upside potential backed by its solid growth projects and financial health. The industry-leading dividend yield is another positive. Investors who already own it should retain it in their portfolio.
BTG currently carries a Zacks Rank #3 (Hold).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.