LONDON -- I'm always searching for shares that can help ordinary investors like you make money from the stock market.
So right now I am trawling through the FTSE 100 (UKX) and giving my verdict on every member of the blue-chip index. Simply put, I'm hoping to pinpoint the very best buying opportunities in today's uncertain market.
Today I am looking at Randgold Resources to determine whether you should consider buying the shares at 6,200 pence.
I am assessing each company on several ratios:
Price/Earnings (P/E): Does the share look like a good value when compared against its competitors?
Price Earnings Growth (PEG): Does the share look like a good value factoring in predicted growth?
Yield: Does the share provide a solid income for investors?
Dividend Cover: Is the dividend sustainable?
So let's look at the numbers:
3-year EPS Growth
3-year Dividend Growth
The consensus analyst estimate for this year's earnings per share is $5.10 (up 19%) and dividend per share is $0.50 (up 25%).
Trading on a projected P/E of 19.5, Randgold appears significantly more expensive than its peers in the mining sector, who are currently trading on an average P/E of around 6. That said, Randgold's sky-high P/E and high growth rate give a PEG ratio of around 1, which implies the share is fairly priced for the near-term earnings growth the firm is expected to produce.
Offering a 0.6% yield, the dividend is significantly less than the mining sector average of 2.7%. However, Randgold has a three-year compounded dividend growth rate of 135%, implying the payout could soon catch up and overtake that of the company's peers.
Indeed, the dividend is more than 10 times covered, giving Randgold room for huge payout growth.
Strong historic growth, but is Randgold expensive?
I believe Randgold is not currently expensive. Although Randgold's projected P/E is significantly higher than the sector average, Randgold's PEG ratio does highlight the strong near-term growth the firm is expected to produce. I believe this potential justifies the high P/E.
Indeed, one of the best-performing shares over the past decade has been Randgold. Trading down at 400 pence during 2004, Randgold shares have since seen a gain of 1,460%. The performance has been down to Randgold's explosive revenue and earnings growth.
I believe 2012 has seen Randgold achieve record gold production -- the company is currently producing around 850,000 ounces of gold per year. However, I believe Randgold is targeting 1.2 million ounces a year by 2015.
That said, Randgold is operating within some unstable countries, which has affected production. In particular, production at Randgold's Tongon mine in the Ivory Coast was affected during the last quarter due to power grid problems.
Randgold also reports in U.S. dollars. However, operating costs are split 40:60 between the Central African Franc (CFA) and the U.S. dollar. The CFA is fixed against the euro, which could mean any further weakness in the dollar/euro exchange rate could push up costs for Randgold and reduce operating profits.
Anyway, taking into account Randgold's strong historic growth, next year's predicted growth and the share's PEG ratio, I believe now looks to be a good time to buy Randgold Resources at 6,200 pence.
More FTSE opportunities
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In the meantime, please stay tuned for my next verdict on a FTSE 100 share.
The article Is Now the Time to Buy Randgold Resources? originally appeared on Fool.com.
Fool contributor Rupert Hargreaves has no positions in the stocks mentioned above. The Motley Fool has no positions in the stocks mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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