Why AngloGold Ashanti (AU) Is On Investors’ Radar Today

AngloGold Ashanti (AU) has attracted fresh attention after recent trading, with the stock last closing at $101.36. For investors watching gold miners, the current share price and recent returns are prompting closer scrutiny.

While the share price has recently seen a 5.13% 1 day decline to $101.36, the 30 day share price return of 12.62% and very large 1 year total shareholder return of 280.98% point to strong momentum that has built over a longer stretch.

If AngloGold Ashanti has you looking more broadly at materials and cyclicals, it can also be worth checking how other sectors are moving through fast growing stocks with high insider ownership.

With the share price close to its analyst target and an indicated 20% intrinsic discount, the key question now is simple: is AngloGold Ashanti still undervalued, or is the market already pricing in future growth?

P/E Of 22.7x: Is It Justified?

On a P/E of 22.7x, AngloGold Ashanti screens as cheaper than many Metals and Mining peers, even after the strong share price move that has already played out.

The P/E multiple tells you how much investors are paying today for each dollar of current earnings. It is a useful shorthand for expectations around profitability and growth in this sector. For a gold miner with established operations across Africa, Australia and the Americas, this ratio can help you compare what the market is paying here versus elsewhere in the industry.

In AngloGold Ashanti’s case, the current 22.7x P/E sits below both the US Metals and Mining industry average of 28x and a peer average of 33.3x. It is also below an estimated fair P/E of 31.3x that the SWS model suggests the market could move toward if current assumptions hold. That combination, alongside high quality earnings and a 27.8% return on equity, indicates that investors are paying a lower multiple than many comparable names.

Result: Price-to-earnings of 22.7x (UNDERVALUED)

However, you also have to weigh risks such as potential earnings volatility linked to gold prices, as well as the possibility that current analyst targets could limit near term upside if sentiment cools.

Another View: What The DCF Model Suggests

The P/E comparison points to AngloGold Ashanti looking cheap relative to peers, and our DCF model also highlights potential upside. On this view, the shares at $101.36 sit about 20.5% below an estimated future cash flow value of $127.42, which also appears undervalued.

That kind of gap can close in different ways, through price moves, changing assumptions, or both. The key question is how comfortable you are with the cash flow forecasts that underpin this fair value range.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out AngloGold Ashanti for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 881 undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own AngloGold Ashanti Narrative

If you look at this and reach a different conclusion, or simply prefer to test the numbers yourself, you can build a personalised view in just a few minutes with Do it your way.

A great starting point for your AngloGold Ashanti research is our analysis highlighting 4 key rewards and 2 important warning signs that could impact your investment decision.

Looking for more investment ideas?

If AngloGold Ashanti is on your radar, do not stop there. Widening your search now can reveal opportunities you will wish you had spotted earlier.

• Target growth potential in smaller names by scanning these 3534 penny stocks with strong financials that combine higher risk with the possibility of meaningful share price moves.
• Capture the momentum around artificial intelligence by reviewing these 23 AI penny stocks that are positioned around data, automation and real world AI applications.
• Focus on value by checking these 881 undervalued stocks based on cash flows that screen for companies trading below estimated cash flow based assessments.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.