Barrick Gold Is Making Stunning ProgressABX) have staged an impressive turnaround and are up considerably this year. In fact, Barrick Gold is up over 300% from its 52-week low levels. I have been bullish on Barrick Gold this year and although the company has rallied strongly, I think it has more room to run. Thus, I think Barrick Gold is a buy at current levels.
A good quarter
Barrick Gold reported its Q2 earnings last month, missing the analysts’ estimates on both earnings and revenue.
At first look, Barrick Gold’s earnings may seem disastrous as it missed the consensus on both revenue and earnings. However, if you dig deeper into the report, you’ll notice that Barrick Gold is actually making great progress. Barrick Gold is a highly-leveraged company as its growth was fueled by acquisitions.
However, Barrick Gold made the most of the debt-fueled acquisitions just before gold prices crashed. Now that the gold prices are recovering, it is important for Barrick Gold to not repeat the mistakes of the past and continue reducing debt. Barrick Gold’s management has taken a firm stance on reducing its debt. Not so long ago, Barrick Gold’s debt towered over $10 billion. However, the company has managed to bring it down to $9 billion after having paid off $968 million this year.
The company plans to capitalize on the high gold prices by reducing debt consistently and aims to slash it further by $1 billion this year. A $2 billion reduction in debt will be in-line with the company’s guidance and will significantly improve the company’s balance sheet going forward.
Although there’s still a long way to go before Barrick Gold improves its financial condition, I think the consistent progress will be reflected in the share price.
Despite the fact that Barrick Gold has racked up over 200% gains in 2016, I think the stock still has more upside to offer. Increasing profitability will help the company repay its debt, which will be beneficial for investors in the long run. Thus, I think Barrick Gold is still a buy.
Published on Aug 5, 2016By Ayush Singh