Thursday, July 28, 2011

Barrick (ABX) puts in a good quarter and its stock price looks cheap right now

Barrick (ABX) ( announced its 2q11 financial results a few minutes ago and at first glance they look pretty solid. So to cut to the chase and show a really way simple company development chart, here's how bottom line profits have evolved these last few quarters:

Fair to say that the U$1.159Bn reported today fits in quite nicely. As for quarterly EPS, that looks like this:

And to stretch this overly simple analysis one stage further, if we multiply those quarterly EPS figures by four to get an annual equivalent, then take the share price at the end of each quarter, then divide one into another, we get this price/earnings ratio that seems to suggest ABX is competitively priced right now.

By the way, the only change to that formula above is for the current quarter, as I've used today's share price and not that of June 30th 2011 (which was lower). To wrap up, to get back to that approx 12X average we'd need an ABX share price at U$56, which implies a 15% upside to today's price. Gold willing, that looks pretty reachable from here and so in your author's view ABX represents value on these quarterly numbers.

disclosure: no position in ABX DYOfreakinDD dude.