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Why Alamos Gold Is a Better Choice than Agnico Eagle Now
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Gold enjoyed a solid run during the first half of 2016 with prices surging as much 25%, spurred by Brexit-induced market volatility, the U.S. Federal Reserve’s dovish stance and concerns over the global economy.
However, the yellow metal lost its momentum toward the year-end with prices retreating in the last two months of 2016 following President Trump’s election win and the U.S. Federal Reserve’s interest rate hike. Gold’s decline was also triggered by a surge in the U.S. dollar. Nevertheless, Gold regained some lost ground earlier this year with prices breaking above the $1,200 an ounce threshold.
The Fed, on March 15, raised interest rates for the second time in three months, citing an improving labor market and greater consumer confidence. The central bank hiked benchmark interest rate to a range of 0.75% to 1%. However, the Fed signaled at only two more rate hikes by the end of 2017.
The Fed’s less hawkish tone triggered a slump in the U.S. dollar and fueled a spike in gold prices that gained more than 2% a day after the rate hike to settle at their highest level in two weeks. Gold prices continued to rally on weakness in the greenback and the metal ended the last week on a high note, scoring the biggest weekly gain since early Feb 2017. Expectations of a slower pace of rate hike in 2017 (as reflected by the Fed outlook) coupled with political uncertainties in Europe augurs well for the yellow metal.
In this write up, we run a comparative analysis on two gold mining stocks – Alamos Gold Inc. (AGI - Free Report) and Agnico Eagle Mines Ltd. (AEM - Free Report) – to figure out why the former is a better option for investment right now.
Alamos Gold, sporting a Zacks Rank #2 (Buy), engages in the acquisition, exploration, development, and extraction of gold deposits in North America. Agnico Eagle, a Zacks Rank #5 (Strong Sell) stock, engages in the exploration, development, and production of mineral properties in Canada, Finland, and Mexico.
Let's take a closer look at how Alamos Gold and Agnico Eagle are stacked up against each other in terms of certain key metrics.
Production & Cost Outlook
Alamos Gold expects its gold production to be in the range of 400,000 to 430,000 ounces in 2017, a 6% rise from 2016 production of 392,000 ounces based on the mid-point of the forecast range. The company envisions its all-in sustaining costs (AISC) – the most important gold-mining cost metric – to fall 7% to $940 per ounce in 2017 from $1,010 per ounce in 2016.
Agnico Eagle, on the other hand, expects its payable gold production to decline to 1.55 million ounces in 2017 from 1.66 million ounces in 2016. Moreover, it expects AISC to rise to $850-$900 per ounce in 2017 from $824 per ounce in 2016.
Price Performance
Alamos Gold has clearly outperformed Agnico Eagle over the past one year. During this period, Alamos Gold’s shares rallied 54.7% while Agnico Eagle saw a 17.5% gain. Alamos Gold has also gained roughly 22% year-to-date compared with a 5% gain recorded by Agnico Eagle.
A comparison with the Zacks categorized Mining-Gold industry also shows Alamos Gold has outperformed the industry’s gain of 6.6% in the above-mentioned period.
Estimate Revisions
Over the past two months, Alamos Gold’s estimates for the current year has increased by around 17% to 14 cents per share. On the other hand, Agnico Eagle’s estimates for the current year decreased 64% over the same period to 41 cents.
Growth Expectations
In terms of earnings growth expectations, Alamos Gold scores way above Agnico Eagle. The expected earnings per share growth rate for Alamos Gold for the current year currently stands at a staggering 390% compared with an expected decline of 17.01% for Agnico Eagle.
Leverage & Liquidity
Alamos Gold has a lower leverage as evident by its debt to equity ratio of 0.17 compared with Agnico Eagle’s debt to equity ratio of 0.24.
In terms of liquidity (as determined by the current ratio), Alamos Gold appears to be more liquid than Agnico Eagle. The current ratio for Alamos Gold is 4.56 compared with 2.90 for Agnico Eagle.
In Conclusion
Going by the above arguments, it can safely be said that Alamos Gold stands out as a better investment proposition compared to Agnico Eagle. With a solid Zacks Rank, positive estimate revisions, healthy outlook and strong growth prospects, the scale is clearly tilted in favor of Alamos Gold. In fact, it is the only buy-rated stock in the Zacks categorized Mining-Gold industry right now.
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Why Alamos Gold Is a Better Choice than Agnico Eagle Now
Gold enjoyed a solid run during the first half of 2016 with prices surging as much 25%, spurred by Brexit-induced market volatility, the U.S. Federal Reserve’s dovish stance and concerns over the global economy.
However, the yellow metal lost its momentum toward the year-end with prices retreating in the last two months of 2016 following President Trump’s election win and the U.S. Federal Reserve’s interest rate hike. Gold’s decline was also triggered by a surge in the U.S. dollar. Nevertheless, Gold regained some lost ground earlier this year with prices breaking above the $1,200 an ounce threshold.
The Fed, on March 15, raised interest rates for the second time in three months, citing an improving labor market and greater consumer confidence. The central bank hiked benchmark interest rate to a range of 0.75% to 1%. However, the Fed signaled at only two more rate hikes by the end of 2017.
The Fed’s less hawkish tone triggered a slump in the U.S. dollar and fueled a spike in gold prices that gained more than 2% a day after the rate hike to settle at their highest level in two weeks. Gold prices continued to rally on weakness in the greenback and the metal ended the last week on a high note, scoring the biggest weekly gain since early Feb 2017. Expectations of a slower pace of rate hike in 2017 (as reflected by the Fed outlook) coupled with political uncertainties in Europe augurs well for the yellow metal.
In this write up, we run a comparative analysis on two gold mining stocks – Alamos Gold Inc. (AGI - Free Report) and Agnico Eagle Mines Ltd. (AEM - Free Report) – to figure out why the former is a better option for investment right now.
Alamos Gold, sporting a Zacks Rank #2 (Buy), engages in the acquisition, exploration, development, and extraction of gold deposits in North America. Agnico Eagle, a Zacks Rank #5 (Strong Sell) stock, engages in the exploration, development, and production of mineral properties in Canada, Finland, and Mexico.
Let's take a closer look at how Alamos Gold and Agnico Eagle are stacked up against each other in terms of certain key metrics.
Production & Cost Outlook
Alamos Gold expects its gold production to be in the range of 400,000 to 430,000 ounces in 2017, a 6% rise from 2016 production of 392,000 ounces based on the mid-point of the forecast range. The company envisions its all-in sustaining costs (AISC) – the most important gold-mining cost metric – to fall 7% to $940 per ounce in 2017 from $1,010 per ounce in 2016.
Agnico Eagle, on the other hand, expects its payable gold production to decline to 1.55 million ounces in 2017 from 1.66 million ounces in 2016. Moreover, it expects AISC to rise to $850-$900 per ounce in 2017 from $824 per ounce in 2016.
Price Performance
Alamos Gold has clearly outperformed Agnico Eagle over the past one year. During this period, Alamos Gold’s shares rallied 54.7% while Agnico Eagle saw a 17.5% gain. Alamos Gold has also gained roughly 22% year-to-date compared with a 5% gain recorded by Agnico Eagle.
A comparison with the Zacks categorized Mining-Gold industry also shows Alamos Gold has outperformed the industry’s gain of 6.6% in the above-mentioned period.
Estimate Revisions
Over the past two months, Alamos Gold’s estimates for the current year has increased by around 17% to 14 cents per share. On the other hand, Agnico Eagle’s estimates for the current year decreased 64% over the same period to 41 cents.
Growth Expectations
In terms of earnings growth expectations, Alamos Gold scores way above Agnico Eagle. The expected earnings per share growth rate for Alamos Gold for the current year currently stands at a staggering 390% compared with an expected decline of 17.01% for Agnico Eagle.
Leverage & Liquidity
Alamos Gold has a lower leverage as evident by its debt to equity ratio of 0.17 compared with Agnico Eagle’s debt to equity ratio of 0.24.
In terms of liquidity (as determined by the current ratio), Alamos Gold appears to be more liquid than Agnico Eagle. The current ratio for Alamos Gold is 4.56 compared with 2.90 for Agnico Eagle.
In Conclusion
Going by the above arguments, it can safely be said that Alamos Gold stands out as a better investment proposition compared to Agnico Eagle. With a solid Zacks Rank, positive estimate revisions, healthy outlook and strong growth prospects, the scale is clearly tilted in favor of Alamos Gold. In fact, it is the only buy-rated stock in the Zacks categorized Mining-Gold industry right now.
Some Other Stocks to Consider
Apart from Alamos Gold, investors interested in the basic materials sector may also consider BHP Billiton Limited (BHP - Free Report) and Amerigo Resources Ltd. (ARREF - Free Report) , both of which carry a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
5 Trades Could Profit "Big-League" from Trump Policies
If the stocks above spark your interest, wait until you look into companies primed to make substantial gains from Washington's changing course.
Today Zacks reveals 5 tickers that could benefit from new trends like streamlined drug approvals, tariffs, lower taxes, higher interest rates, and spending surges in defense and infrastructure. See these buy recommendations now >>