The stock of Anglogold Ashanti (NYSE:AU, 30-year Financials) is believed to be modestly undervalued, according to GuruFocus Value calculation. GuruFocus Value is GuruFocus' estimate of the fair value at which the stock should be traded. It is calculated based on the historical multiples that the stock has traded at, the past business growth and analyst estimates of future business performance. If the price of a stock is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. On the other hand, if it is significantly below the GF Value Line, its future return will likely be higher. At its current price of $22.5 per share and the market cap of $9.4 billion, Anglogold Ashanti stock is believed to be modestly undervalued. GF Value for Anglogold Ashanti is shown in the chart below.
Because Anglogold Ashanti is relatively undervalued, the long-term return of its stock is likely to be higher than its business growth, which averaged 13.7% over the past five years.
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Companies with poor financial strength offer investors a high risk of permanent capital loss. To avoid permanent capital loss, an investor must do their research and review a company's financial strength before deciding to purchase shares. Both the cash-to-debt ratio and interest coverage of a company are a great way to to understand its financial strength. Anglogold Ashanti has a cash-to-debt ratio of 0.64, which which ranks worse than 77% of the companies in Metals & Mining industry. The overall financial strength of Anglogold Ashanti is 5 out of 10, which indicates that the financial strength of Anglogold Ashanti is fair. This is the debt and cash of Anglogold Ashanti over the past years:
Companies that have been consistently profitable over the long term offer less risk for investors who may want to purchase shares. Higher profit margins usually dictate a better investment compared to a company with lower profit margins. Anglogold Ashanti has been profitable 5 over the past 10 years. Over the past twelve months, the company had a revenue of $4.4 billion and earnings of $2.27 a share. Its operating margin is 33.04%, which ranks better than 86% of the companies in Metals & Mining industry. Overall, the profitability of Anglogold Ashanti is ranked 6 out of 10, which indicates fair profitability. This is the revenue and net income of Anglogold Ashanti over the past years:
One of the most important factors in the valuation of a company is growth. Long-term stock performance is closely correlated with growth according to GuruFocus research. Companies that grow faster create more value for shareholders, especially if that growth is profitable. The average annual revenue growth of Anglogold Ashanti is 13.7%, which ranks better than 78% of the companies in Metals & Mining industry. The 3-year average EBITDA growth is 31.8%, which ranks better than 75% of the companies in Metals & Mining industry.
Another way to evaluate a company's profitability is to compare its return on invested capital (ROIC) to its weighted cost of capital (WACC). Return on invested capital (ROIC) measures how well a company generates cash flow relative to the capital it has invested in its business. The weighted average cost of capital (WACC) is the rate that a company is expected to pay on average to all its security holders to finance its assets. If the ROIC is higher than the WACC, it indicates that the company is creating value for shareholders. Over the past 12 months, Anglogold Ashanti's ROIC was 15.64, while its WACC came in at 12.84. The historical ROIC vs WACC comparison of Anglogold Ashanti is shown below:
In summary, the stock of Anglogold Ashanti (NYSE:AU, 30-year Financials) gives every indication of being modestly undervalued. The company's financial condition is fair and its profitability is fair. Its growth ranks better than 75% of the companies in Metals & Mining industry. To learn more about Anglogold Ashanti stock, you can check out its 30-year Financials here.
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