Why Randgold Resources (GOLD) Is Up Today

NEW YORK (TheStreet) -- Randgold Resources (GOLD) was rising 4.85% to $72.24 on Monday afternoon after the West African gold producer announced that it expects to increase gold production by 25% to 30% this year.

The company expects to increase production thanks to increasing grades at the Loulo-Gounkoto mining complex in Mali. Improving gold recovery and ore throughput at its Tongan mine in the Ivory Coast and an initial full-year contribution from its recently commissioned Kibali mine in the Congo should also help increase production. Randgold's board kept its recommendation for the final dividend of the year at 50 cents.

Furthermore, Randgold posted a profit of $278.4 million for the fiscal year that ended on Dec. 31, down from $431.8 million one year earlier. Basic earnings were $3.02 a share, down from $4.70 one year earlier. But the figure surpassed analysts' expectations of $2.83. The company actually increased gold production but a 17% decline in gold prices offset that increase.

Randgold produced 910,374 troy ounces for the year, up from 794,844 one year earlier. Gold sales increased to 920,248 from 793,852 ounces, but cash costs decreased 2.7% to $715 per troy ounce in 2013.

TheStreet Ratings team rates RANDGOLD RESOURCES LTD as a "hold" with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:

"We rate RANDGOLD RESOURCES LTD (GOLD) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, deteriorating net income and disappointing return on equity."

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

  • The revenue growth came in higher than the industry average of 2.4%. Since the same quarter one year prior, revenues rose by 15.1%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • GOLD's debt-to-equity ratio is very low at 0.00 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.46, which illustrates the ability to avoid short-term cash problems.
  • 49.37% is the gross profit margin for RANDGOLD RESOURCES LTD which we consider to be strong. Regardless of GOLD's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, GOLD's net profit margin of 24.47% compares favorably to the industry average.
  • 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 decreased by 21.4% when compared to the same quarter one year ago, dropping from $103.52 million to $81.34 million.
  • Looking at the price performance of GOLD's shares over the past 12 months, there is not much good news to report: the stock is down 27.97%, and it has underformed the S&P 500 Index. In addition, the company's earnings per share are lower today than the year-earlier quarter. Although its share price is down sharply from a year ago, do not assume that it can now be tagged as cheap and attractive. The reality is that, based on its current price in relation to its earnings, GOLD is still more expensive than most of the other companies in its industry.
  • You can view the full analysis from the report here: GOLD Ratings Report

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