Skip to main content

NEW YORK (TheStreet) -- Barrick Gold (ABX) stock is sliding by 5.96% to $6.70 in mid-morning trading on Monday, as gold prices fall on indications of a 2015 interest rate hike by the Fed.

Strong U.S. economic data released last week that showed higher growth than expected in the second quarter and an increase in consumer spending last month up the likelihood that the Fed will increase interest rates by the end of 2015. 

Further, this weekend, Fed policy makers who met in Jackson Hole, Wyo. indicated that they probably will hike interest rates before the year ends despite recent global market volatility, The Wall Street Journal reports.

Since gold is not an interest bearing asset, the precious metal will likely fall in value as interest rates rise.

TheStreet Recommends

Gold for December delivery is lower by 0.30% to $1,130.50 per ounce on the COMEX this morning.

Separately, TheStreet Ratings team rates BARRICK GOLD CORP as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:

"We rate BARRICK GOLD CORP (ABX) a SELL. This is driven by a number of negative factors, 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 generally high debt management risk, disappointing return on equity and generally disappointing historical performance in the stock itself."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The debt-to-equity ratio of 1.26 is relatively high when compared with the industry average, suggesting a need for better debt level management.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Metals & Mining industry and the overall market, BARRICK GOLD CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • ABX's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 62.26%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
  • Despite the weak revenue results, ABX has outperformed against the industry average of 27.2%. Since the same quarter one year prior, revenues slightly dropped by 9.2%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • 41.46% is the gross profit margin for BARRICK GOLD CORP which we consider to be strong. Regardless of ABX's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of -0.40% trails the industry average.
  • You can view the full analysis from the report here: ABX Ratings Report