The shares are up almost 27% year-to-date but that appreciation makes them look expensive on a forward price-to-earnings basis. Randgold is trading at almost 27X the current 2011 consensus earnings estimate vs. an industry average of 20X. Barrick Gold (ABX) is an example of a gold stock at the cheaper end of the spectrum. It trades at just 14X next year's earnings, one of the industry's lowest valuations on this basis.
Wall Street sentiment reflects Randgold's quandary. While analysts are generally bullish with five buy ratings vs. three holds; the average price target of $97.92 is a discount of almost 7% to the stock's closing price of $104.85 on Wednesday.
In the second quarter, the company's profit soared 92%, but the West African miner had to contend with production issues and higher cash costs. I sat down with CEO Mark Bristow recently at the Denver Gold Forum to see if Randgold's blow-out results can continue and get his thoughts on whether the stock is overvalued relative to its peers.TheStreet: Your second-quarter profit rose 92% year-over-year was that just because of a rising gold price? Bristow: There were definitely other factors. We had a couple of extraordinary items in the results: one, a write back from an asset-backed security ... that we
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