Newmont Corp (NYSE:NEM) Embodies Peter Lynch's GARP Strategy with Strong Growth and Sound Valuation

In the world of long-term investing, few strategies have shown the lasting success of Peter Lynch’s method, which focuses on finding growing companies available at sensible prices. This system, frequently called Growth at a Reasonable Price (GARP), steers clear of the extremes of pure growth or deep-value investing, instead looking for businesses with solid fundamentals, lasting expansion, and good financial health. One company now fitting these standards is Newmont Corp (NYSE:NEM), a major participant in the gold mining industry.

Recent Performance and Growth Metrics

Newmont has shown strong financial results, especially in its earnings growth, a key part of Lynch’s strategy. Over the last five years, the company’s earnings per share (EPS) have increased at a yearly rate of 21.58%, fitting well within Lynch’s goal range of 15–30%. This points to a steady growth path instead of sharp, possibly unsteady expansion. In the latest year, EPS rose by almost 130%, showing good operational management and positive market conditions for gold.

Key growth and performance metrics include:

• 5-Year EPS Growth: 21.58%
• Latest Year EPS Growth: 129.58%
• Revenue Growth (5-Year): 13.91% yearly

Valuation and Financial Health

Lynch favored companies trading at sensible valuations compared to their growth, using the PEG ratio—which measures the price-to-earnings (P/E) ratio against earnings growth—as a main tool. Newmont’s PEG ratio, calculated from past growth, is 0.74, much lower than Lynch’s limit of 1. This implies the stock is priced low considering its historical performance. Also, the company keeps a sound balance sheet, with a debt-to-equity ratio of 0.23, far under Lynch’s chosen highest point of 0.6. This careful borrowing lowers financial risk and aids long-term steadiness.

Other important health and valuation markers:

• Current Ratio: 2.23, showing good short-term liquidity
• Return on Equity (ROE): 19.55%, above the 15% minimum Lynch supported
• P/E Ratio: 16.04, under industry and S&P 500 averages

Profitability and Efficiency

Newmont does very well in profitability, a Lynch requirement for spotting well-managed companies. Its profit margin of 30.49% is near the best in the metals and mining industry, doing better than over 90% of competitors. Operating and gross margins are similarly strong, at 38.86% and 57.21% each. Return on invested capital (ROIC) is 11.01%, pointing to effective use of capital, though it is important to see that the three-year average is lower, hinting at recent gains. These figures match Lynch’s interest in companies that are not only expanding, but also very profitable and efficiently run.

Dividend and Shareholder Considerations

While Lynch did not focus on dividends, he valued companies that gave value to shareholders. Newmont provides a dividend yield of 1.34%, with a manageable payout ratio of 17.99% of earnings. Even though the dividend has dropped a bit each year lately, the company has kept payments for more than ten years, showing dedication to shareholder returns. Lynch also liked firms with share buyback plans, and Newmont has lowered its share count from a year ago, a good sign for per-share value increase.

Fundamental Analysis Overview

A full fundamental analysis scores Newmont at 7 out of 10, noting strong points in profitability and financial health, with good growth and appealing valuation. The report mentions that the company grades very well on margins and solvency, and it is priced low compared to industry rivals. These traits make it an interesting pick for investors searching for quality and value, a pairing Lynch always aimed for.

Conclusion

Newmont Corp holds many features Peter Lynch wanted in long-term investments: lasting growth, sensible valuation, high profitability, and a sound balance sheet. While the company works in a changing industry, its careful growth, financial caution, and effective operations place it well for investors centered on GARP ideas. As with any investment, complete research and thought of wider market factors are necessary.

For those wanting to look into other companies that match Peter Lynch’s standards, more screening results are available here.

Disclaimer: This article is for informational purposes only and does not constitute investment advice. Investors should conduct their own research and consult with a financial advisor before making investment decisions.