5 Top-Ranked Gold Stocks for Year Ahead

BOSTON (TheStreet) -- Gold has remained at the forefront of the market, despite ongoing calls for a top. The metal rallied 27% in 2010. It is down modestly in 2011, but with elevated prices, gold producers are attractive stocks as their profit margins are still at cyclical highs. TheStreet's quantitative equity model, which evaluates fundamentals and share-price performance, ranks the "buy." It expects them to deliver solid risk-adjusted returns in the next 12 months. They are ordered by net score, from good to great.

5. Eldorado Gold ( EGO) is an exploration, mining and processing company, with gold mining interests in Turkey, Greece and China. Its stock has risen 33% in 12 months, but has corrected 3.3% in the past three.

Eldorado's fourth-quarter net income advanced 31% to nearly $44 million, but earnings per share stagnated at eight cents because shares outstanding rose by 11 million. Revenue surged 47% to $213 million. The gross margin widened from 60% to 65%, but the operating margin contracted from 39% to 37%. Eldorado held $375 million of cash and $167 million of debt at fourth-quarter's end. Its stock is costly based on cash flow, trading at a multiple of 31, an 85% industry premium. But, it's cheap based on its book value multiple of 3 and cash flow multiple of 11. Of analysts covering Eldorado, 70% rank its stock "buy." Raymond James predicts that the stock will advance 69% to $28 in 12 months. Rodman & Renshaw forecasts that it will rise 18% to $19.50.

4. Agnico Eagle Mines ( AEM) engages in gold exploration and production in the U.S., Canada, Finland and Latin America. Its stock has fallen 13% in the past three months, but has risen 22% in twelve.

Agnico's fourth-quarter net income increased 84% to $88 million. Earnings per share advanced 70% to 51 cents, restricted by a higher share count. Revenue nearly doubled to $439 million. Agnico's balance sheet held $105 million of cash and equivalents and $650 million of debt at quarter's end, translating to a quick ratio of 0.7 and a debt-to-equity ratio of 0.2. Return on equity, a measure of profitability, widened from 3.1% to 9.1%, exceeding the industry average of 8.6%. Agnico's stock sells for a cash flow multiple of 24, a 44% industry premium. Yet, its book value multiple of 3.2 and sales multiple of 8.1 reflect peer discounts of 8% and 63%. Of researchers rating the stock, half advise purchasing it. Raymond James offers a $97 target. In contrast, Barclays offers a $53 target.

3. Royal Gold ( RGLD) acquires and holds income-generating precious metal royalties. It has interests in various projects for gold, silver, copper, lead and zinc. Its stock has fallen 4.7% in three months.

Royal Gold's fiscal second-quarter net income nearly doubled to $18 million. Earnings per share rose a more modest 43% to 33 cents, restrained by a larger float. Revenue increased 62% to $56 million. The operating margin stretched from 50% to 56%. Royal Gold has leveraged its ample balance sheet in the past year. Its cash balance fell to $71 million from $317 million in the year-earlier period and it issued $250 million of debt. It was debt-free in the year-earlier quarter. Royal Gold's stock costs 28-times forward earnings, a premium to the market, but a 35% peer discount. It's expensive based on its cash flow multiple of 37. Of analysts following Royal Gold, 43% rank its stock "buy." McNicoll Lewis expects a rise of 67% to $81.50. RBC Capital predicts a gain to $66.

2. Iamgold ( IAG) explores for gold, silver, zinc, copper, niobium and diamonds. It released fourth-quarter results Friday. Its stock has gained 27% in three months and is up 46% in the past year.

Iamgold's adjusted quarterly earnings more than tripled to 39 cents, exceeding analysts' consensus estimate by 35%. In contrast, Iamgold missed consensus in the previous quarter by 37%. Its top-line figure rose 73% to $459 million, outperforming consensus by 14%. The stock rallied more than 6% intraday on the earnings report. Iamgold trades at a book value multiple of 2.8 and a sales multiple of 7.6, 19% and 66% peer discounts. But, its cash flow multiple of 28 represents a sizable premium. Of analysts following Iamgold, a disproportionate 79% advise purchasing its stock. The Canada-based company is rated "outperform" by Scotia Capital, which expects its stock to advance 53% to $32 in the next 12 months. HSBC ranks the stock "neutral", predicting that it will drop 9% to $19.

1. Yamana Gold ( AUY) engages in the acquisition, development and operation of gold-producing properties. The Toronto-based company's stock has rallied 11% in three months. It is up 46% in a year.

Yamana's fourth-quarter net income more than quadrupled to $160 million. Earnings per share more than tripled to 22 cents. Revenue grew 34% to $535 million. Yamana's gross margin extended from 65% to 67%. Its balance sheet continues to improve. Cash and equivalents have gained 94% to $331 million since the year-earlier quarter as debt fell by 8% to $487 million. Yamana's stock trades at a trailing earnings multiple of 20 and a sales multiple of 5.4, 24% and 76% discounts to metals and mining industry averages. Of analysts evaluating the company, 17, or 89%, advocate purchasing its stock, one says to hold and one advises selling it. A median target of $16.34 suggests an impending gain of 34%. Raymond James offers a lofty target of $19. Credit Suisse forecasts that the shares will rise to $15.

-- Written by Jake Lynch in Boston.

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