Goldcorp (GG) Stock Slumping Amid Lower Gold Prices

NEW YORK (TheStreet) -- Shares of Goldcorp (GG) are down by 2.39% to $17.18 in late morning trading on Friday, as some mining and related stocks tumble as a result of the decline in the price of gold.

The price of the yellow metal is falling due to a better than expected rise in nonfarm payrolls for May.

Gold for August delivery is slipping by 0.53% to $1,169 per ounce on the COMEX this morning.

Gold extended its loss into a third day after the Commerce Department said 280,000 new jobs were added in May, the largest spike since the end of 2014 and higher than the consensus estimate of 225,000, The Wall Street Journal reports.

The unemployment rate in May ticked upward slightly to 5.5% from 5.4%.

Improvement in the labor market can clear the way for the Fed to hike up interest rates, which is expected in the second half of the year, The Journal added. The publication noted that a rate hike can be bad news for gold as it is a non interest earning asset. The precious metal can struggle to entice investors away from interest bearing assets when rates rise.

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

"We rate GOLDCORP INC (GG) a SELL. This is driven by multiple 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 unimpressive growth in net income, weak operating cash flow and generally disappointing historical performance in the stock itself."

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

  • 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 188.8% when compared to the same quarter one year ago, falling from $98.00 million to -$87.00 million.
  • Net operating cash flow has significantly decreased to $58.00 million or 78.75% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
  • The share price of GOLDCORP INC has not done very well: it is down 23.04% 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.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Metals & Mining industry and the overall market, GOLDCORP INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • 39.04% is the gross profit margin for GOLDCORP INC which we consider to be strong. Regardless of GG's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, GG's net profit margin of -8.55% significantly underperformed when compared to the industry average.
  • You can view the full analysis from the report here: GG Ratings Report

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