Investment Alert: Buy Newmont Mining (NEM) Under $44/share
Disclaimer: Investment Alerts have a medium to long-term time horizon. These do not constitute financial advice and you should contact a financial advisor before deciding whether it is appropriate for your individual circumstances.
Sometimes you look at a chart and just get giddy with excitement about the prospects of selling the tippity top or buying the absolute low. Over time, you learn those moments of excitement are often traps before stocks march higher or plunge lower, respectively.
Still, the tingling stir of what might be a mammoth opportunity in Newmont Mining has arisen.
- Newmont Mining has an attractive long-term stock chart with prices hovering around multi-year support levels
- The fundamental case is strong with significant upside based on a valuation analysis
- Forecasts for future revenue growth should correlate with share price gains if history is any indicator
Compelling Stock Chart
Going back a few years, you can easily the bullish divergence from the long-term trendline that Newmont Mining enjoyed during the 2020-21 period, when it reached a high in the mid-$80s.
Now it has lost about half of its value and fallen all the way to the mid-$40s, where coincidentally the long-term support line from 2018 has acted as a magnet.
Newmont isn’t acting perfectly around that long-term support line. It’s broken it back in 2019 and again in 2022 and this year too.
But each time it’s dipped below the key level, it has reclaimed it shortly thereafter. That suggests that, at the very least, the reward to risk ratio favors bulls who take a long position at these levels.
Fundamental Reasons To Buy
Not only is the chart supporting a compelling reward to risk ratio but the fundamentals are in line with a long strategy too.
When we ran a discounted cash flow forecast analysis on Newmont Mining, we arrived at fair value of $52.86 per share, which implied a possible percentage gain of 25.2%.
If that isn’t enough, the company also pays a pretty handsome dividend of 3.72% currently. And net income is expected to grow this year too.
The share price is generally following the expectations for revenue growth. Fast growth in 2020-21 correlated to a fast paced ascent in the share price. A slowdown in 2022 was equally captured by a reversion in share price to current levels.
Now it appears that the consensus forecasts are for revenues to rise steadily for the next couple of years from $12.1 billion to $13.2 billion. If so, the share price has upside potential.