New Gold (NGD) Stock Falls as Gold Prices Slump Again

NEW YORK (TheStreet) -- Shares of New Gold  (NGD)  were down 7.20% to $3.61 in late afternoon trading Monday to give up some of the gains it made Friday after gold prices briefly rallied.

Gold for December delivery rose by 2.4%, or $27.20, to reach $1,169.80 per troy ounce on Friday, the Wall Street Journal reported.

The rally in the gold company's shares on Friday stemmed from data that showed jobs growth in October was weaker than expected, along with gold having its largest one-day percentage gain since June 19.

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But gold prices once again declined on Monday to $1,165.70, which sent the gold stocks lower.

Vancouver-based New Gold also announced Monday it would acquire 100% of Bayfield Ventures.

More than 4.8 million shares had changed hands as of 3:49 p.m., compared to the average volume of 3,648,010.

Separately, 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 588.5% when compared to the same quarter one year ago, falling from $12.20 million to -$59.60 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 has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 38.98%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 700.00% compared to the year-earlier 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.
  • 44.36% is the gross profit margin for NEW GOLD INC which we consider to be strong. Regardless of NGD's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, NGD's net profit margin of -35.20% significantly underperformed when compared to the industry average.
  • You can view the full analysis from the report here: NGD Ratings Report

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