By Peter Garnry
Today we are focusing on our top 10 equity picks in North America. Half of the names are readily recognised, such as Netflix, Facebook, Celgene, Biogen and Keurig Green Mountain. But the top spot is held by Eldorado Gold with a 12-month return forecast of 23 percent (see table). Please note that the uncertainty indicator is minus 5, indicating that our model has a significantly lower forecast than the consensus which is currently 34 percent.
Is gold mining making a comeback?
Most investors will likely be surprised to see a gold mining company at the top of our list given the 33 percent fall in the price of gold since its 2011 peak. Eldorado Gold is a Canadian gold miner with 54 percent of revenue coming from Turkey and 37 percent from China. The miner has a very competitive cost level with the cash cost at USD 577 per ounce in Q1 compared to an average realised selling price of USD 1,299. As a result, Eldorado runs a 43 percent EBITDA margin.
Eldorado Gold is not particularly cheap, trading at a 12-month forward EV/EBITDA of 10.1 which is slightly above the market's average. Current expectations are looking for flat revenue growth this year so the investment case is built on stabilising gold prices, new capacity coming online this year and continued cost management leading to attractive shareholder returns.
Eldorado Gold's mine at Jinfeng, China. Photo: Company archives
Peter Garnry is head of equity strategy at Saxo Bank. Click here for more of his articles.
— Edited by Clare MacCarthy