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Monday, October 22nd, 2018 - Buy Gold - Bringing you trusted gold news and gold investing information since 2006

Two Profitable, Undervalued Gold Stocks With Low Put/Call Ratios

This is a follow-up to a list we generated a few days ago (Top 15 Most Undervalued Gold Stocks by Analyst Target Price).

In that list we identified gold stocks that are deeply undervalued, when comparing the current price to the average analyst target price (used as a proxy for fair value).

We wanted to dig deeper, and collected profitability data on that universe of stocks. We’ve managed to find two stocks from the original list that have been more profitable than their competitors over the last five years, when comparing gross and net profit margins.

Additionally, both of these stocks have a large number of open call option contracts relative to put option contracts, i.e. a low Put/Call ratio.

Using discount to analyst target price may be a naive way to find undervalued companies. But if those companies have demonstrated greater profitability, they deserve closer attention. Options traders seem to think there’s upside to these names–what do you think?

Price target data sourced from Finviz, options data sourced from Schaeffer’s and management efficiency data sourced from Reuters.

Interactive Chart: Compare the performance of AUY and AZK

The list has been sorted by discount to analyst target price.

1. Yamana Gold, Inc. (AUY):

Gold Industry. Market cap of $8.56B.

  • Discount to Analyst Target Price: Price at time of writing $11.28 vs. target price of $15.66 (discount of -38.83%).
  • Profitability Analysis: 5-year average gross margin at 41.03% vs. industry average at 40.46%. 5-year average net profit margin at 23.14% vs. industry average at -2.34%.
  • Options Sentiment: Call open interest at 125,226 contracts vs. put open interest at 46,340 contracts (Put/Call ratio at 0.37).
  • Other Sentiment Data: Short float at 0.79%, which implies a short ratio of 0.66 days. The stock has gained 11.58% over the last year.
  • Recent Developments: Announced 200% dividend increase and special dividend (Nov 2010). Reaffirmed FY 2010 production guidance (Nov 2010).

2. Aurizon Mines Ltd. (AZK):

Gold Industry. Market cap of $993.98M.

  • Discount to Analyst Target Price: Price at time of writing $6.37 vs. target price of $7.75 (discount of -22.05%).
  • Profitability Analysis: 5-year average gross margin at 54.48% vs. industry average at 40.46%. 5-year average net profit margin at 7.72% vs. industry average at -2.34%.
  • Options Sentiment: Call open interest at 2,262 contracts vs. put open interest at 476 contracts (Put/Call ratio at 0.21).
  • Other Sentiment Data: Short float at 1.78%, which implies a short ratio of 4.52 days. The stock has gained 70.05% over the last year.
  • Recent Developments: Announced the signing of an option agreement with Midland Exploration Inc. on the Patris gold property, held 100% by Midland (Dec 2010). Reaffirmed long term production guidance (Oct 2010).

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

The original article is published at http://www.c2ads.net/full-text-rss/makefulltextfeed.php?url=http://seekingalpha.com/sector/gold-precious.xml&format=rss&submit=Create+Feed


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