In the hunt for investment chances, many investors use a systematic method that aims to find companies selling for less than their true value. This method, called value investing, uses filters to find stocks that seem priced low by the market according to basic financial measures. A typical first step is to search for companies with good valuation marks, suggesting they may be priced low compared to their financial condition, earnings, and future possibilities. The aim is to find good firms the market has not noticed for the moment, providing a possible buffer for the patient investor.
Kinross Gold Corp (NYSE:KGC), a major gold mining company with a worldwide set of mines and projects, recently appeared using such a "Decent Value" filter process. This filter emphasizes a good basic valuation grade while also needing acceptable marks in earnings, financial condition, and expansion. For a value investor, this mix is important: a low price is only worthwhile if the core company is stable and able to maintain and develop. A full basic analysis report on Kinross gives a view full of data on how the company measures against these points.
Valuation: The Heart of the Chance
The main draw for a value-focused filter is Kinross's valuation grade of 7 out of 10. This mark indicates the stock is priced well next to similar companies and its own financial results. Looking at the specifics shows a detailed view:
- Price-to-Earnings (P/E): At 22.39, Kinross's P/E ratio is higher than the perfect value level but stays lower priced than 82% of similar companies in the Metals & Mining group, where the average P/E is much higher at 34.86.
- Forward-Looking Measures: The valuation argument gets stronger when considering the future. The company's Price/Forward Earnings ratio of 13.15 is lower priced than 75% of its group and rests well under the S&P 500 average.
- Cash Flow & EBITDA: More persuasive are the price-to-cash flow and business value measures. Kinross is valued lower priced than 91% of its group based on its Price/Free Cash Flow ratio and lower priced than 74% based on its Enterprise Value/EBITDA ratio.
- Growth Adjustment: The small PEG ratio, which changes the P/E for expected earnings expansion, shows the market may not be fully accounting for the company's future possibility.
For a value investor, these measures are the first step. They show the market is putting a cautious price on Kinross's assets and cash flows, possibly creating the low pricing the method looks to use.
Financial Condition: A Stable Base
A low-priced stock can be a poor investment if the company's finances are poor. Kinross's financial condition grade of 7 out of 10 helps reduce this worry, indicating a steady operating foundation.
- Good Solvency: The company shows very good solvency. Its debt-to-free-cash-flow ratio of 0.62 is outstanding, meaning it could pay all its debt in under eight months using its present cash flow. This is better than 91% of the group.
- Strong Finances: An Altman-Z score of 6.21 shows a very small short-term chance of financial trouble, and a careful debt-to-equity ratio of 0.16 gives a good equity buffer.
- Sufficient Liquidity: With a current ratio of 2.84, the company has more than enough immediate assets to meet its immediate debts, keeping operating freedom.
This financial strength is needed for the value idea. It means the company is not just low priced because it is failing; instead, it has the ability to withstand market changes and put money into its future, which is required for long-term value to appear.
Earnings: Quality at a Lower Price
Value investing is not only about buying low-priced stocks; it is about buying solid companies at a low price. Kinross's earnings grade of 8 out of 10 confirms it is a highly earning operator within its field.
- High Yields: The company's Return on Assets (13.34%) and Return on Equity (20.25%) are some of the best in the group, doing better than about 94% and 94% of similar companies. This shows good use of its money and assets.
- Good Margins: Kinross keeps notable profit margins, with an Operating Margin of 38.20% and a Profit Margin of 25.19%, both placed in the top part of its industry.
These earnings measures are key because they show the company's core quality. A value investor needs confidence that the business can produce good yields on capital, as this is what will finally push shareholder value and support a higher price over time.
Expansion: The Driver for New Pricing
While not the main point of a strict-value filter, acceptable expansion prospects can work as a trigger for the market to look again at a stock's price. Kinross's expansion grade of 5 out of 10 shows a varied but good recent record against softer future guesses.
- Good Past Results: The company has given notable recent expansion, with Earnings Per Share (EPS) rising 133.9% and Revenue increasing 32.9% over the last year.
- Future Guesses: Expert guesses for the next years are more limited, expecting a small drop in revenue but a minor rise in EPS. This cautious view may already be part of the stock's present price.
For the value method, the past expansion shows the company's ability, while the mild future guesses may add to the present low pricing. The investor's view is that the company's good earnings and condition will let it possibly do better than these limited guesses.
Conclusion
Kinross Gold Corp shows an example of the kind of chance a systematic value filter tries to find. It is a company trading at a price that seems low compared to its group, especially on cash flow and forward-earnings bases. Importantly, this lower price is not matched with financial trouble; instead, it is backed by good earnings, a very sound financial state, and a shown recent ability for expansion. This mix of being "low priced" but not "poor" matches the value investing idea of looking for a buffer in quality businesses.
Investors curious about finding other companies that meet similar points of sound valuation, condition, earnings, and expansion can locate more possible chances by using the Decent Value Stocks filter on ChartMill.
Disclaimer: This article is for information only and is not financial guidance, a suggestion, or a bid to buy or sell any securities. The information given is based on supplied data and should not be the only reason for any investment choice. Investing has risk, including the chance of losing the original amount. Always do your own research and think about talking with a registered financial advisor before making any investment choices.
