NEW YORK (TheStreet) -- New Gold (NGD - Get Report) shares are up 3.8% to $6.41 on Wednesday after the company announced a 24% increase in its gold resource estimate for its British Columbia-based New Afton mine.
Seeking Alpha estimates that the entire project is worth $800 million, but adds caution due to the fact an increase in resources does not necessarily mean an increase in reserves which have been deemed economical to mine.
TheStreet Ratings team rates NEW GOLD INC as a Sell with a ratings score of D+. TheStreet Ratings Team has this to say about their recommendation:
"We rate NEW GOLD INC (NGD) a SELL. This is driven by some concerns, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its feeble growth in its earnings per share, deteriorating net income, disappointing return on equity and generally disappointing historical performance in the stock itself."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- NEW GOLD INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has reported a trend of declining earnings per share over the past two years. During the past fiscal year, NEW GOLD INC swung to a loss, reporting -$0.38 versus $0.41 in the prior year.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Metals & Mining industry. The net income has significantly decreased by 105.0% when compared to the same quarter one year ago, falling from $36.30 million to -$1.80 million.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Metals & Mining industry and the overall market on the basis of return on equity, NEW GOLD INC underperformed against that of the industry average and is significantly less than that of the S&P 500.
- In its most recent trading session, NGD has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
- NGD, with its decline in revenue, underperformed when compared the industry average of 4.5%. Since the same quarter one year prior, revenues slightly dropped by 5.6%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- You can view the full analysis from the report here: NGD Ratings Report