B2Gold Corp. (BTG), based in Vancouver, Canada, is a gold producer that operates primarily on three mines in Mali, the Philippines, and Namibia. The company operates the Fekola Mine in Mali, the Masbate Mine in the Philippines, and Otjikoto Mine in Namibia. In comparison, Hycroft Mining Holding Corporation (HYMC) in Denver, Colo., operates as a gold and silver producing company in the United States. It owns interests in the Hycroft mine located in the state of Nevada.
The LBMA Gold Price PM surged 6% in price month-over-month in February, ending at $1,910 per ounce and marking its most robust performance since May 2021. The market volatility that has been created by rising inflation and the geopolitical tension is raising the demand for yellow metal as a safe haven asset. Furthermore, according to Georgette Boele, senior precious metals strategist, gold prices are expected to maintain the $2,000 per ounce level for the next two years. Boele has upgraded her gold price forecast from her previous outlook, where she expected prices to decline to $1,500 per ounce by the end of the year. Both BTG and HYMC are well-known names in the gold mining market and might benefit from rising gold prices.
Over the past year, BTG stock has declined 6.3% in price, while HYMC declined 77.6%. BTG has gained 12.8% over the past six months, while HYMC has declined 10.6%. And HYMC has gained 9.4% intraday, while BTG has gained 0.7%.
Click here to check out our Gold and Silver Industry Report for 2022
But which stock is a better buy now? Let’s find out.
Latest Developments
Last month, BTG announced that the Government of Mali had granted BTG’s Malian subsidiary a new exploration permit that covers the same perimeter as the Menankoto permit. Exploration was expected to commence by February 15, with two drill rigs and additional drill rigs to be deployed shortly thereafter. This might add to the company’s operational capability.
On March 15, HYMC announced a $56 million equity private placement with precious metals investor Eric Sprott and AMC Entertainment Holdings, Inc. (AMC). The company intends to use the net proceeds from the private placement for general corporate purposes, including repayment, refinancing, redemption, or repurchase of existing indebtedness, working capital, or capital expenditures and other investments.
Recent Financial Results
For its fiscal fourth quarter, ended Dec. 31, 2022, BTG’s gold revenue increased 9.7% year-over-year to $526.11 million. Its cash provided by operating activities rose 35.4% from the prior-year quarter to $266.29 million. Its net income and EPS stood at $153.14 million and $0.13, respectively.
For its fiscal third quarter, ended September 30, HYMC’s revenues increased 157.7% year-over-year to $31.68 million. Its net loss and loss per share stood at $23.21 million and $0.39, respectively. And for the nine months ended September 30, its net cash used in operating activities came in at $27.05 million.
Past and Expected Financial Performance
BTG’s revenue has grown at a 20.9% CAGR over the past five years. Analysts expect its EPS to decline 5.6% for its fiscal year 2022 and increase 8.8% for its fiscal year 2023. The company’s revenue is expected to increase 15.9% for the quarter ending June 2022 and 1.1% for its fiscal year 2022. It is expected that BTG’s EPS will increase 20% per annum over the next five years.
HYMC’s revenue has declined at a 26.2% CAGR over the past five years. The Street expects its EPS to increase 89.1% and 37.5%, respectively, for the quarter ended December 2021 and for the quarter ending March 2022. Its revenue is expected to increase 18.8% for the quarter ended Dec. 31, 2021 and 124.7% for its fiscal 2021 but decline 97.4% for its fiscal 2022.
Profitability
BTG gross profit margin, EBITDA margin, and net income margin are 65.11%, 61.69%, 23.84%, respectively, compared to HYMC’s negative 29.94%, 43.07%, and 58.53%.
And BTG’s 12.83% and 15.30% respective ROA and ROTC compare with HYMC’s negative 17.45% and 25.88%.
Thus, BTG is the profitable stock here.
Valuation
In terms of its forward EV/Sales, HYMC is currently trading at 2.39x, which is 0.8% higher than BTG’s 2.37x. However, BTG’s forward Price/Sales multiple of 2.53 is 220.3% higher than HYMC’s 0.79.
POWR Ratings
BTG has an overall B rating, which equates to Buy in our proprietary POWR Ratings system. In contrast, HYMC has an overall rating of D, which translates to Sell. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
BTG has a Quality grade of A, which is consistent with its trailing 12-month levered FCF margin of 24.12%, which is 309.44% higher than the 5.89% industry average. In comparison, HYMC has an F grade for Quality, which is in sync with its levered FCF margin of negative 58.92%, which is substantially lower than the industry average.
Both BTG and HYMC have a Sentiment grade of C, which is justified by mixed analyst sentiments for the stocks.
In the 49-stock Miners – Gold industry, BTG is ranked #6, while HYMC is ranked #25. Click here to see the additional POWR Ratings for BTG. To see the additional POWR Ratings for HYMC, click here.
Winner
Gold prices are rising and are expected to remain elevated in the coming months. Both BTG and HYMC should benefit from the rising prices. However, a better financial position and higher profit margins we think make BTG the better investment here.
Our research shows that odds of success increase when one invests in stocks with an Overall Rating of Strong Buy or Buy. View all the top-rated stocks in the Miners – Gold industry here.
Click here to check out our Gold and Silver Industry Report for 2022
BTG shares were trading at $4.29 per share on Wednesday morning, down $0.04 (-0.92%). Year-to-date, BTG has gained 10.15%, versus a -8.85% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research.
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