Gold Fields Limited (GFI), based in South Africa, and Seabridge Gold Inc. (SA), headquartered in Canada, are among the leading companies in the gold industry. Let’s evaluate these two stocks in this article to determine which is a better investment, I believe GFI is the superior choice.
Gold has the ability to hold its value and safeguard one's purchasing power over the long term, on the face of rampant inflation and currency fluctuations. Therefore, despite the major turbulence in the current economy, marked by persistently high inflation, rising interest rates, and growing concerns of a potential recession, investing in gold can be considered a viable option.
Moreover, as per World Gold Council, the total supply of gold experienced a 1% rise, primarily driven by an unprecedented surge in mine production and increased recycling in the first quarter of this year. Notably, mine production reached a record high for the first quarter, exhibiting a 2% year-on-year increase.
Additionally, the volumes of gold recycling witnessed a noteworthy 5% year-on-year growth, likely influenced by the upward trajectory of gold prices.
In addition, it is worth mentioning that the global hedge book saw a modest expansion of 8 tons during the first quarter, attributable to the prevailing higher gold prices. Both GFI and SA are expected to benefit from the industry tailwinds.
GFI has gained 79.9% over the past nine months, while SA has gained 5% over the same time period. Moreover, over the past year, GFI has gained 28.8%, while SA has declined 2.7%. GFI closed its last trading session at $15.04 and SA closed at $13.89.
Here are the reasons why I think GFI could perform better in the near term:
Latest Developments
On May 2, 2023, GFI announced a partnership with Osisko Mining Inc. to develop and mine the world-class underground Windfall Project in Québec, Canada, now known as the Windfall Mining Group. Under executed and implemented transaction agreements, GFI, through a 100% held Canadian subsidiary, had acquired a 50% interest in the feasibility stage Windfall Project.
On March 16, GFI announced that the company and AngloGold Ashanti agreed on the key terms of a proposed joint venture in Ghana between GF Tarkwa and AngloGold Ashanti's neighboring Iduapriem mines.
On the other hand, on May 11, SA announced that its wholly-owned subsidiary, KSM Mining ULC had agreed to the principal terms of a royalty agreement under which Sprott Resource Streaming and Royalty Corp will pay KSMCo $150 million and KSMCo grants Sprott a 1.2% net smelter royalty on its 100% owned KSM project located in northern British Columbia, Canada.
Recent Financial Results
For the fiscal first quarter that ended March 2023, GFI’s gold produced came in at 577 thousand ounces. During the same quarter, the company’s revenue increased marginally year-over-year to $1,901/ounce.
During the fiscal year that ended December 2022, GFI’s revenue rose 2.2% year-over-year to $4.29 billion. Its investment income grew 60.2% year-over-year to $13.30 million. Its profit for the year amounted to $721.70 million, while its headline EPS attributable to owners of the parent increased 19.2% year-over-year to 118 cents.
On the other hand, SA’s net loss for the period rose 71.7% year-over-year to CAD10.78 million ($7.98 million) in the fiscal first quarter that ended March 31, 2023. Its comprehensive loss for the period grew 164.3% year-over-year to CAD16.20 million ($11.99 million). Its loss per share increased 62.5% year-over-year to CAD0.13.
Dividend History
GFI’s annual dividend of $0.41 translates to a 3.19% yield on the current share price. Its four-year average dividend yield is 2.30%. The company’s dividend payouts have grown at CAGRs of 59.6% and 41.1% over the past three and five years, respectively.
On the other hand, SA does not pay any dividends.
Analysts’ Expectations
GFI’s EPS is expected to increase 53.5% year-over-year to $1.35 in the fiscal year 2024. However, SA’s EPS is expected to decline 13.9% year-over-year to negative $0.27 in the same year.
Profitability
GFI’s 17.37% trailing-12-month ROCE is higher than SA’s negative 1.65%. GFI’s trailing-12-month ROTC of 15.32% is higher than SA’s negative 1.38%. In addition, GFI’s trailing-12-month ROTA of 9.69% is higher than SA’s negative 1.08%.
So, GFI is relatively more profitable.
POWR Ratings
While GFI has an overall B rating, equating to a Buy our proprietary POWR Ratings system, SA has an overall F rating, which translates to a Strong Sell. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. GFI has a grade of B in Quality. The stock’s trailing-12-month cash from operation exceeds the industry average of $377.45 million.
On the other hand, SA has an F grade in Quality. The stock’s trailing-12-month negative cash from operations of $4.44 million is lower than the industry average.
In the 39-stock Miners - Gold industry, GFI is ranked #10, while SA is ranked last.
Beyond what we’ve stated above, our POWR Ratings system has also rated both GFI and SA for Growth, Value, Momentum, Stability, and Sentiment.
Get all GFI ratings here. Also, click here to see the additional POWR Ratings for SA.
The Winner
The gold industry is expected to expand and thrive due to the perpetual demand for precious metals and both companies are likely to capitalize on the growing demand.
However, as discussed above, GFI’s recent partnerships, higher earnings growth potential, stable dividend history, and lower valuation make it the better buy here.
Our research shows that the odds of success increase if one invests in stocks with an Overall POWR Rating of Buy or Strong Buy. Click here to access the top-rated stocks in the Miners-Gold industry.
Discover 10 widely held stocks that our proprietary model shows have tremendous downside potential. Please make sure none of these “death trap” stocks are lurking in your portfolio:
GFI shares were trading at $14.83 per share on Wednesday morning, down $0.21 (-1.40%). Year-to-date, GFI has gained 45.84%, versus a 7.71% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.
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