Anglogold Ashanti PLC (NYSE:AU) Fits the 'Affordable Growth' Investment Profile

The search for growth stocks at reasonable prices remains a cornerstone of disciplined investing, with the "Affordable Growth" strategy aiming to identify companies showing strong expansion potential without the high valuations that often come with high-flyers. This approach methodically assesses stocks based on strong growth paths, good profitability, and firm financial health, all while making sure the price paid does not already account for overly positive future prospects. By selecting for companies that score well across these fundamental areas, investors can potentially find opportunities where business growth and share price increase are not mutually exclusive. One such company currently meeting these strict criteria is Anglogold Ashanti PLC (NYSE:AU).

Growth Trajectory

A core belief of the affordable growth philosophy is identifying companies with clear and sustainable expansion. Anglogold Ashanti's fundamental report reveals a strong growth story, which is important for the strategy as it looks for businesses that are actively increasing their earnings power.

• Strong Recent EPS Growth: The company's earnings per share rose by an impressive 517.47% over the past year, indicating a significant uptick in profitability.
• Good Historical Trends: Over a longer period, the company has maintained a quite good average annual EPS growth of 16.81%, showing consistency beyond a single excellent year.
• Good Revenue Expansion: Revenue growth is equally good, with a 26.43% increase in the last year and a 10.45% average annual growth rate over recent years.
• Positive Future Outlook: Analysts expect this momentum to continue, with projected EPS growth of nearly 15% and revenue growth of over 13% annually in the coming years.

This mix of strong recent performance, a good historical record, and a positive future outlook provides a multi-layered growth argument that fits well with the strategy's requirement for "good growth."

Valuation Assessment

The "affordable" part of the strategy is crucial, as paying too much for growth can cancel out its benefits. Anglogold Ashanti's valuation metrics suggest the market may not be fully accounting for its growth potential, making it an interesting candidate for value-conscious growth investors.

• Attractive Relative Valuation: While its standard Price/Earnings (P/E) ratio of 19.38 might seem moderate on its own, it is rather inexpensive compared to its industry peers, being lower than 80% of companies in the Metals & Mining sector.
• Positive Forward-Looking Metrics: The valuation picture improves significantly when looking forward. The company's Price/Forward Earnings ratio of 8.88 is considered acceptable and is less expensive than 85% of its industry competitors.
• Growth Compensation: The low PEG ratio, which adjusts the P/E for expected earnings growth, shows the stock is rather inexpensively valued when its growth prospects are considered.

These valuation traits are important for the strategy, as they make sure an investor is not buying a growth stock at a speculative high, but rather one where the price offers a sensible entry point for the expected expansion.

Profitability and Financial Health

An affordable growth stock must be more than just an inexpensive, expanding company; it needs the underlying financial strength to maintain its growth. Anglogold Ashanti scores well here, with high profitability and firm financial health, lowering the risk profile for investors.

• High Profitability Scores: The company has exceptional return metrics, including a Return on Equity of 27.35% and a Return on Invested Capital of 19.74%, both placing it in the top tier of its industry.
• Good and Improving Margins: With a Profit Margin of 22.19% and an Operating Margin of 35.00%, the company is highly efficient, and these margins have been getting better in recent years.
• Firm Balance Sheet: The company shows strong financial health, with an Altman-Z score indicating low bankruptcy risk and a Debt-to-Free-Cash-Flow ratio of 1.31, suggesting it can quickly pay down its debts from its cash flow.

These factors in profitability and health are key supports for the overall strategy. High profitability funds future growth initiatives internally, while a healthy balance sheet provides stability during economic downturns, making the growth story more lasting.

Conclusion

Anglogold Ashanti PLC presents a strong case study for the affordable growth investment approach. The company's powerful and well-supported growth path, combined with a valuation that seems acceptable relative to both its industry and its own prospects, creates an attractive risk-reward profile. Its foundational strengths in profitability and financial health further support the thesis, suggesting the growth is built on a stable and efficient operational base. For investors looking for companies that mix expansion with fiscal discipline, a detailed review of the full fundamental analysis is recommended.

This analysis of Anglogold Ashanti was identified through a specific screening methodology. Investors interested in finding other companies that fit similar criteria of strong growth, reasonable valuation, and sound fundamentals can explore more results from the Affordable Growth screen here.

Disclaimer: This article is for informational purposes only and does not constitute financial advice, a recommendation to buy or sell any security, or an offer to solicit any transaction in securities. All investments involve risk, including the possible loss of principal. Investors should conduct their own independent research and consult with a qualified financial advisor before making any investment decisions.