Is Newmont Mining (NYSE:NEM) a good hedge for your existing portfolios?

Considering the 60-days investment horizon, Newmont Mining is expected to generate 1.49 times more return on investment than the market. However, the company is 1.49 times more volatile than its market benchmark. It trades about 0.08 of its potential returns per unit of risk. The DOW is currently generating roughly 0.12 per unit of risk. As many old-fashioned traders are trying to avoid basic materials space, it makes sense to summarize Newmont Mining a little further and try to understand its current volatility patterns. We will summarize if the expected returns on Newmont Mining will justify its current volatility. Newmont Mining's low volatility may still impact the value of the stock as we estimate it as currently overvalued. The real value, based on our analysis, is getting close to 62.07 per share.
Published over a year ago
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Reviewed by Gabriel Shpitalnik

Newmont Mining has roughly 3.88 B in cash with 3.23 B of positive cash flow from operations. This results in cash-per-share (CPS) ratio of 4.84.
Volatility is a rate at which the price of Newmont Goldcorp or any other equity instrument increases or decreases for a given set of returns. It is measured by calculating the standard deviation of the annualized returns over a given period of time and shows the range to which the price of Newmont Goldcorp may increase or decrease. In other words, similar to Newmont's beta indicator, it measures the risk of Newmont Goldcorp and helps estimate the fluctuations that may happen in a short period of time. So if prices of Newmont Goldcorp fluctuate rapidly in a short time span, it is termed to have high volatility, and if it swings slowly in a more extended period, it is understood to have low volatility. Please read more on our technical analysis page.

How important is Newmont Goldcorp's Liquidity

Newmont Goldcorp financial leverage refers to using borrowed capital as a funding source to finance Newmont Goldcorp Corp ongoing operations. It is usually used to expand the firm's asset base and generate returns on borrowed capital. Newmont Goldcorp financial leverage is typically calculated by taking the company's all interest-bearing debt and dividing it by total capital. So the higher the debt-to-capital ratio (i.e., financial leverage), the riskier the company. Financial leverage can amplify the potential profits to Newmont Goldcorp's owners, but it also increases the potential losses and risk of financial distress, including bankruptcy, if the firm cannot cover its debt costs. The degree of Newmont Goldcorp's financial leverage can be measured in several ways, including by ratios such as the debt-to-equity ratio (total debt / total equity), equity multiplier (total assets / total equity), or the debt ratio (total debt / total assets). Please check the breakdown between Newmont Goldcorp's total debt and its cash.

Newmont Goldcorp Gross Profit

Newmont Goldcorp Gross Profit growth is one of the most critical measures in evaluating the company. The Gross Profit growth rate is calculated simply by comparing Newmont Goldcorp previous period's values with its current period's values. Each time period you're measuring should be of equal lengths the increase or decrease, in a company's Gross Profit between two periods. Here we show Newmont Goldcorp Gross Profit growth over the last 10 years. Please check Newmont Goldcorp's gross profit and other fundamental indicators for more details.

Newmont Goldcorp Volatility Drivers

Newmont Goldcorp unsystematic risk is unique to Newmont Goldcorp Corp and usually not directly affected by the market or economic environment. An example of unsystematic risk is the possibility of poor earnings or a layoff due to coronavirus. One may mitigate nonsystematic risk by buying different securities in the same industry or by buying in different sectors. For example, if you have a position in Newmont Goldcorp you can also buy United States Steel. You can also mitigate this risk by investing in the materials sector as well as in companies having nothing to do with it. This type of risk is also called diversifiable risk and can be understood from analyzing Newmont Goldcorp important indicators over time. Here we run a correlation analysis between relevant fundamental ratios over at least ten year period to find a relationship in the way they react to changes in Newmont Goldcorp income statement and balance sheet. Here are more details about Newmont volatility.
0.650.990.970.910.380.540.870.890.25-0.180.34-0.440.17-0.18-0.12-0.240.06
0.650.670.590.4-0.120.150.480.49-0.07-0.4-0.2-0.66-0.25-0.6-0.55-0.490.5
0.990.670.980.920.320.550.880.880.19-0.260.32-0.480.17-0.2-0.14-0.260.09
0.970.590.980.940.320.580.90.810.07-0.290.4-0.480.13-0.11-0.04-0.190.07
0.910.40.920.940.350.720.920.770.08-0.190.49-0.320.3-0.010.03-0.09-0.14
0.38-0.120.320.320.350.30.350.430.320.290.130.090.030.210.230.07-0.22
0.540.150.550.580.720.30.780.28-0.11-0.020.35-0.180.28-0.31-0.29-0.37-0.36
0.870.480.880.90.920.350.780.65-0.03-0.230.34-0.420.17-0.24-0.2-0.33-0.25
0.890.490.880.810.770.430.280.650.59-0.020.32-0.270.28-0.030.02-0.1-0.04
0.25-0.070.190.070.080.32-0.11-0.030.590.520.120.310.320.040.03-0.02-0.31
-0.18-0.4-0.26-0.29-0.190.29-0.02-0.23-0.020.520.080.840.030.220.180.31-0.45
0.34-0.20.320.40.490.130.350.340.320.120.080.10.540.470.520.44-0.21
-0.44-0.66-0.48-0.48-0.320.09-0.18-0.42-0.270.310.840.10.130.490.420.52-0.43
0.17-0.250.170.130.30.030.280.170.280.320.030.540.130.260.30.21-0.27
-0.18-0.6-0.2-0.11-0.010.21-0.31-0.24-0.030.040.220.470.490.260.990.95-0.08
-0.12-0.55-0.14-0.040.030.23-0.29-0.20.020.030.180.520.420.30.990.94-0.03
-0.24-0.49-0.26-0.19-0.090.07-0.37-0.33-0.1-0.020.310.440.520.210.950.940.03
0.060.50.090.07-0.14-0.22-0.36-0.25-0.04-0.31-0.45-0.21-0.43-0.27-0.08-0.030.03
Click cells to compare fundamentals

What is driving Newmont Goldcorp Investor Appetite?

The modest gains experienced by current holders of Newmont Mining may encourage stakeholders to take a closer look at the firm as it closed today at a share price of 66.85 on 7,305,715 in trading volume. The company executives have been quite successful in maneuvering the stock at opportune times to take advantage of all market conditions in June. The stock standard deviation of daily returns for 30 days investing horizon is currently 2.43. The current volatility is consistent with the ongoing market swings in June 2020 as well as with Newmont Mining unsystematic, company-specific events.

Will Newmont stakeholders exit after the pull down?

The mean deviation is down to 1.96 as of today. Newmont Mining currently demonstrates below-verage downside deviation. It has Information Ratio of -0.01 and Jensen Alpha of 0.16. However, we do advice investors to further question Newmont Mining expected returns to ensure all indicators are consistent with the current outlook about its relatively low value at risk.

Our Conclusion on Newmont Mining

While few other entities within the gold industry are still a little expensive, even after the recent corrections, Newmont Mining may offer a potential longer-term growth to stakeholders. While some in two weeks oriented stakeholders may not share our view, we believe it may not be a good time to buy new shares of Newmont.

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Editorial Staff

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