This article was submitted by Marcus Holland from the online trading website, FinancialTrading.com.
In the junior miner group of the gold sector, there are a montage of factors at play in determining the most compelling buy. Brigus Gold Corp. (AMEX: BRD), DRDGOLD Ltd (AMEX: DRD), and Primero Gold Corp (NYSE: PPP) are attractive for a variety of features.
The gold industry is not noted for companies that have strong financial statements. But Brigus Gold Corp. DRDGOLD Ltd, and Primero Gold Corp all have very health price-to-earnings (PE) ratios, which is a critical measure. As the table below shows, the PEs of these stocks compare favorably with those of much larger entities in the gold sector.
Brigus Gold Corp.
In addition to a stronger price-to-earnings ratio, Brigus Gold Corp, based in Canada, has a very favorable earnings-per-share (EPS) trend. For this year, the EPS growth for Brigus Gold Corp. is rising by 116.67%. Next year, the EPS for Brigus is projected by analysts to increase by another 38.46%. That is a very bullish trend as the EPS growth for Brigus as for the last five years its EPS growth was a negative 27.80%.
Sales growth for Brigus is also vectoring in a positive direction. For the past five years, sales growth averaged 47.83%. On a quarterly basis, it is now surging by 56.78%. Combined with the improving EPS growth, that is a powerful combination.
Headquartered in South Africa, DRDGOLD Ltd presents much the same earnings-per-share growth and sales growth for investors as does Brigus Gold. This year, earnings-per-share growth is higher by 224.10%. The analyst community estimates that it will rise by another 50.90% next year.
For DRDGOLD Ltd, sales growth is now at a quarterly pace of 17.17%. For the last five year, sales growth rose by just 0.70%. As with Brigus Gold, there is a very appealing tandem. Financialtrading.com that focusses on day trading tips considers DRDGOLD to be a strong buy.
Primero Mining Corp
Primero Mining Corp, another Canadian miner, has EPS growth of 61.27% this year. For the next year, it is projected to increase by 32%. While still making money, sales growth has been off for Primo Mining Corp.
The Presence of Debt is Bullish
Many small cap companies are shut out of the credit markets. No one will lend any money to those firms as the chances of repayment are simply too remote. But Brigus Gold Corp, DRDGOLD Ltd, and Primero Mining Corp. all have a modest level of debt:
- Brigus Gold Corp has a the debt-to-equity ratio of 0.32, meaning that it required 32 cents of borrowing to create each dollar of shareholder equity;
- DRDGOLD Ltd has a debt-to-equity ratio of one of 0.14; and
- Primero Mining Corp has a debt to equity ratio of 0.51.
Even more bullish for these companies is that much of the debt is long term, further evincing the confidence of lenders that these firms will around.
Even More Bullish is the Profit Margin
Lenders, and investors, can take comfort in the fact that each of these junior miners makes money:
- Brigus Gold Corp has a profit margin of 16.43%, more than twice the average profit margin of about 8% for a member of the Standard & Poor’s 500 Index;
- DRD Gold Ltd has a profit margin of 16.31%, almost more than twice higher; and
- Primero Mining Corp has a profit margin of 4.65%.
At such low prices, about $7.95 for DRDGOLD Ltd, around $6.40 for Primero Mining Corp, and under $1 for Brigus, these junior miner stocks are worthy of consideration for rounding out a portfolio to allow for exposure to the gold sector of commodities with profitable entities that have sales and EPS rising.