📖 Your Q2 Earnings Guide: Discover the Stocks ProPicks AI Highlights to Jump Post-EarningsRead more

Gold Stocks To Watch: Starcore International And Gold Resource Corp.

Published 08/27/2014, 08:07 AM
Updated 07/09/2023, 06:31 AM
GC
-
GORO
-
SAM
-

Instead of a weekend report I'd like to do a quick comparison of two Gold stocks, and discuss why I think Starcore International Mines Ltd. (TO:SAM) is still a great opportunity. I own shares of Starcore and am biased so take what I say with that in mind.

After Starcore indicated last year that they'd pay up to 50% of their earnings as dividends I thought it was a great opportunity that the market was completely ignoring. To do a comparison though with what that would mean to the stock I looked at a similar gold stock that paid 50% of their earnings as dividends, and that was Gold Resource Corporation (AMEX:GORO). GORO has since reduced their payout ratio to around 25% of earnings due to low gold prices and other issues. But, that is still a nice payout ratio for a mining stock and the market has rewarded GORO with a higher market cap than it would normally have with no dividend.

If you want to boil it all down to simple numbers, currently GORO produces about 3X as much gold as Starcore, but has a market capitalization of 10x of Starcore. And with Starcore's new dividend, assuming they payout another annual dividend of about the same amount next year, Starcore has a similar payout ratio to GORO. So either the market is overvaluing GORO or undervaluing Starcore or both because the discrepancy in valuations doesn't make a lot of sense. GORO does have more properties than Starcore but since they aren't producing for GORO they shouldn't be worth much in the current marketplace.

So given the fact that Starcore is now a dividend paying stock, if it was valued at a simliar valuation to GORO given its gold production numbers it would have a 75 million to 100 million market cap. Instead it only has a 30 million market cap currently. So in my view Starcore could easily double from here and not even blink an eye because it's undervalued compared to other mining stocks. And that would still put the dividend at 5% if Starcore traded at 40 cents assuming they pay another 2 cent dividend next year. That would still be one of the highest dividends of any gold mining stock and that's after 100% price appreciation from here.

Disclaimer: The views and opinions expressed are for informational purposes only, and should not be considered as investment advice. Please see the disclaimer.

Latest comments

Loading next article…
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.