One Reason New Gold (NGD) Stock Is Up Today

NEW YORK (TheStreet) -- Shares of New Gold (NGD) were gaining 13.2% to $4.54 Monday after gold prices rebounded from recent losses.

Spot gold prices gained 4% to $1,216 an ounce, and U.S. gold futures for February delivery were up 3.6% to $1,142.91 an ounce, according to Reuters, the best one-day increase for gold since 2013.

The rebound comes after Swiss voters voted against a proposal to increase central bank gold holdings to 20% of its forex reserves on Sunday, which caused gold price to fall 2% before rebounding.

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The recent weakness of the Japanese yen stimulated some demand for gold, according to Reuters, which may have contributed to the rebound.

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 several weaknesses, 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.
  • The share price of NEW GOLD INC has not done very well: it is down 10.25% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. 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.
  • 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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