Centerra Gold Inc. (CGAU) is a gold mining company engaged in acquiring, exploring, developing, and operating gold and copper properties internationally. Its principal projects include the 100% owned Mount Milligan gold-copper mine in British Columbia, Canada. On the other hand, Equinox Gold Corp. (EQX) engages in acquiring, exploring, and developing mineral deposits. The company primarily explores gold and silver deposits. In addition, it holds a 60% interest in the Greenstone project located in Ontario, Canada.
With spot gold at roughly $1,845.58 per ounce, gold prices have risen to a two-month high on continued concerns over surging inflation, geopolitical instability, and the uncertainty over omicron’s impact. The demand for gold is primarily rising because it allows investors to hedge their portfolios against uncertain market conditions. The potential monetary policy tightening and a weakening greenback should drive the safe-haven demand for gold further. Therefore, both CGAU and EQX should benefit.
EQX has gained 19.5% over the past six months, while CGAU has returned 15.2%. However, CGAU’s 21.9% gains over the past month are higher than EQX’s 14.3% returns. Moreover, CGAU is the clear winner with 9.9% gains versus EQX’s negative returns in terms of the past three months’ performance.
But which of these two stocks is a better buy now? Let’s find out.
On January 18, 2022, Scott Perry, CGAU’s President, and CEO, said, “Our Mount Milligan and Öksüt Mines paved the way for our strong operating performance in 2021, enabling us to achieve the upper end of our gold production guidance. At the same time, our gold production costs per ounce and all-in sustaining costs on a by-product basis per ounce are expected to be at the lower end and below their respective 2021 guidance ranges.”
On January 13, 2022, EQX announced record production in Q4 2021 of 210,400 ounces of gold. It achieved fiscal 2021 guidance with 602,100 oz of gold produced, a 26% increase over 2020 production. Christian Milau, EQX’s CEO, said, “Equinox Gold had a strong fourth quarter. Outstanding performance at Mesquite and Aurizona was supported by a full quarter of operations at Los Filos and consistent performance at our other mines.”
Recent Financial Results
CGAU’s revenue increased 27% year-over-year to $649.10 million for the nine months ended September 30, 2021. Its net earnings from mine operations grew 60% year-over-year to $127.70 million, while its adjusted net earnings from continuing operations increased 305% year-over-year to $28.10 million. In addition, adjusted EPS from continuing operations increased 280% year-over-year to $0.10.
EQX’s revenues increased 18.9% year-over-year to $701.10 million for the nine months ended September 30, 2021. However, its earnings from mine operations declined 27.8% year-over-year to $139 million, while its adjusted net income came in at $6.20 million representing an 86.8% year-over-year decrease. Also, its adjusted EPS came in at $0.02, down 91.3% year-over-year.
Past and Expected Financial Performance
Analysts expect CGAU’s EPS and revenue to increase 30.5% and 16.5% year-over-year to $1.07 and $1.18 billion, respectively, in fiscal 2022. On the other hand, EQX’s EPS and revenue are expected to increase 126.3% and 15.2% year-over-year to $0.43 and $1.24 billion, respectively, in fiscal 2022.
CGAU’s trailing-12-month revenue is 1.92 times what EQX generates. CGAU is also more profitable with a gross profit margin and EBITDA margin of 63.72% and 50.76% compared to EQX’s 42.85% and 35.84%, respectively.
Furthermore, CGAU’s ROE, ROA, and ROTC of 28.70%, 13.70%, and 17.44% are higher than EQX’s 24.84%, 3.60%, and 4.64%, respectively.
In terms of forward EV/S, EQX is currently trading at 2.07x, higher than CGAU’s 1.56x. Moreover, EQX’s forward EV/EBITDA ratio of 6.33x is 59.4% higher than CGAU’s 3.97x.
So, CGAU is relatively affordable here.
CGAU has an overall rating of B, which equates to a Buy in our proprietary POWR Ratings system. On the other hand, EQX has an overall rating of D, which translates to Neutral. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.
CGAU has a B grade for Value, consistent with its forward EV/S of 1.56x, 15.6% lower than the industry average of 1.85x. However, EQX has a C grade for Value, in sync with its forward EV/S of 2.07x, 11.7% higher than the industry average of 1.85x.
Moreover, CGAU has a grade of A for Quality. This is justified given CGAU’s 39.30% trailing-12-month levered FCF margin, 505.1% higher than the industry average of 6.50%. On the other hand, EQX has a Quality grade of D, in sync with its 2.94% trailing-12-month levered FCF margin, 54.8% lower than the industry average of 6.50%.
Of the 32 stocks in the Miners – Gold industry, CGAU is ranked #1. In comparison, EQX is ranked #29.
Rising geopolitical tensions and the resurgence of COVID-19 cases could increase safe-haven demand for gold in the upcoming months. So, both CGAU and EQX are expected to benefit. However, it is better to bet on CGAU now because of its lower valuation, higher profit margin, and robust financials.
Our research shows that odds of success increase when one invests in stocks with an Overall Rating of Strong Buy or Buy. View all the other top-rated stocks in the Miners – Gold industry here.
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CGAU shares were unchanged in after-hours trading Thursday. Year-to-date, CGAU has gained 5.34%, versus a -5.94% rise in the benchmark S&P 500 index during the same period.
About the Author: Nimesh Jaiswal
Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles. More...
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