Book Profit in This NYSE-Listed Gold Stock – AUY

Mar 15, 2022 12:00 AM PDT | Team Kalkine
Book Profit in This NYSE-Listed Gold Stock – AUY


Yamana Gold Inc.

Yamana Gold Inc. (NYSE: AUY) is a Canadian precious metals producer that generates a substantial amount of gold and silver. It also engages in discovering, extracting, processing, and reclamation of precious metals and other allied operational activities. The Canadian Malartic mine in Canada (50% interest), the Jacobina mine in Brazil, the El Peón and Minera Florida mines in Chile, and the Cerro Moro mine in Argentina are the company's primary mining properties. The MARA project in Argentina (56.25% interest) and the Wasamac project in Canada are two of the company's major projects.

Why Should Investors Book Profit?

  • Declining Fundamentals: Net income fell 27.55% YoY to USD 147.5 million in FY21 (ended December 30, 2021) from USD 203.6 million in FY20.
  • Margin Stress: The company reported operating and net margins of 24.2% and 4.9% in FY21 (ended December 31, 2021) significantly declined from 37.5% and 13.0% reported in FY20.
  • Declining Liquidity Profile: The company's current ratio at the end of FY21 is 1.87x, compared to 2.08x in FY20. This implies declining liquidity over the. This declining ratio suggest that the company's short-term obligations are expanding faster than its resources to fulfil them, which is not a good sign.
  • Metal Price Risk: Gold, silver, and base metal prices fluctuate rapidly on the worldwide market, jeopardising operations' profitability and resulting in mineral property losses. As a result, any adverse price movement could endanger the company's financial position.
  • Regulatory Risk: AUY operates as a gold mining firm, requiring several continuous federal and state approvals. As a result, harsher restrictions or non-compliance with relevant legislation may harm the company's profits.

Valuation Methodology: EV/EBITDA Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's FY1 trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation:

AUY's share price has inclined 40.82% in the past three months and is currently leaning towards the higher band of the 52-week range of USD 3.70 to USD 5.76. We have valued the stock using the EV/EBITDA-based relative valuation methodology and arrived at a target price of USD 4.79.

Considering the company's declining profitability, margin stress, weak liquidity profile, current valuation and associated risks. we recommend a "Sell" rating on the stock at the closing price of USD 5.52%, traded flat, as of March 11, 2022.


Three-Year Technical Price Chart (March 11, 2022). Source: REFINITIV, Analysis by Kalkine Group

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.