New Gold (NGD) Stock Falls on Lower Gold Prices

NEW YORK (TheStreet) -- Shares of New Gold (NGD) were falling 3.2% to $3.04 Tuesday as gold prices declined.

U.S. gold futures for August delivery fell 0.4% to $1,181.40 an ounce on the Comex Tuesday afternoon after falling as low as $1,177.60 earlier in the day.

Gold prices were down on Tuesday as the dollar gained strength as the U.S. Federal Reserve policy meeting started, according to Reuters. The Federal Open Committee will last for two days until Wednesday.

Investors are looking for clues from Federal Reserve chairperson Janet Yellen on when the U.S. central bank might raise its interest rates, according to Reuters.

New Gold is a mining company based in Vancouver, Canada with gold, silver, and copper assets. The company has exploratory and production activity in North America, South America, and Australia.

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 a number of negative factors, 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 weak operating cash flow."

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

  • NEW GOLD INC's earnings have gone downhill when comparing its most recently reported quarter with the same quarter a year earlier. The company has reported a trend of declining earnings per share over the past two years. During the past fiscal year, NEW GOLD INC reported poor results of -$0.95 versus -$0.38 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 2333.3% when compared to the same quarter one year ago, falling from -$1.80 million to -$43.80 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, NEW GOLD INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has decreased to $69.80 million or 14.25% 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.
  • This stock's share value has moved by only 43.75% over the past year. 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.
  • You can view the full analysis from the report here: NGD Ratings Report

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