As gold prices hold near recent highs, a number of gold mining stocks are trading near buy points. Agnico-Eagle Mines, the IBD Stock of the Day, is one of them.
Gold stocks tend to track the price of bullion, exaggerating the ups and downs. Geopolitical risk, demand from central banks and other factors have helped take gold prices to record highs this year. Investors can gain an edge by selecting the highest-quality members of the industry.
Toronto-based Agnico-Eagle is one of 13 stocks in IBD's gold and silver mining industry group with highest-possible 99 Composite Ratings. Its 97 EPS Rating is in the top six of 81 stocks in the group, too.
The company's earnings growth is making an impressive turnaround. After earnings per share declined in the second and third quarters of 2023, EPS rose 39%, 32%, 73%, 161%, 132% and 104% in the subsequent quarters.
Sales growth also is trending solidly higher, climbing from 12% to 37% over that same period, according to FactSet.
Analysts expect EPS to climb nearly 49% to $2.20 in the quarter that just ended, with sales up 24% to $3.549 billion. Agnico-Eagle will announce second-quarter earnings July 30 after the market close.
Agnico-Eagle is the world's third-largest gold miner, with most of its operations in Canada. The company owns 85% of gold production and 87% of gold mineral reserves in Canada. It also has operations in Australia, Finland and Mexico.
Gold Stock And Future Exploration
The company is looking to explore further in Canada's Arctic region, where valuable deposits lie. Agnico-Eagle, which already has Arctic operations in Canada and Finland, sees growing interest from Canada's government in developing that region, company Chairman Sean Boyd said at an investor meeting last Thursday.
The project will take time and patience, Boyd added, according to a transcript provided by FactSet.
Using a baseball analogy, he said Arctic development is in the second inning. "But I would say the first inning was very long and painful. I would just sort of say maybe it was the prepitch clock type of inning where there's lots of foul balls, lots of disputed balls and strikes, you know, pitchers and hitters getting ejected. It's been painful, but I would say, second inning because there's a lot more to do and there's a lot of potential but it's going to take long-term thinking, but it's going to take short-term action."
At the same conference, Boyd said Agnico-Eagle has a better cost structure than the industry average. The company avoids areas with political risk, choosing to focus on the mining business' inherent risks.
"So, it's been a consistent focus on keeping the other risks low and focusing on taking geological risk," Boyd said. " … we found ourselves to have an extremely good team that was able to see through risks and not let their view of risk cloud the opportunity. And we had a team that had really good vision on the geological upside, a lot of opportunities. And when we saw that, we moved quickly to secure those opportunities."
Gold Stock's Base Analysis
Agnico-Eagle Mines stock is forming a cup-with-handle base with a 126.65 buy point. Investors feeling bullish could draw a trendline above the handle's down-sloping highs for an early entry around 123.
The base, however, has a couple of flaws. The relative strength line hasn't matched the stock's rebound since mid-May. Also, the base could be interpreted as a riskier late-stage pattern.
The stock has a 21-day average true range (ATR) of 2.88%. The average true range is a metric available on IBD's MarketSurge that gauges the characteristic breadth of a stock's behavior. Stocks with a high ATR tend to make large price moves that can trigger sell rules. Stocks with lower ATRs tend to make more incremental moves.
With the S&P 500 and Nasdaq now in a power trend, investors can buy stocks with ATRs up to 8%, though they should be wary of being too concentrated in high-octane names.
