Historically, gold has been regarded as a hedge against inflation and a store of value, while also providing diversification for investment portfolios. Over the past 15 months, driven by various factors, the price of gold has surged significantly, making this precious metal even more attractive.
Gold investments have grown substantially, with a 25% year-on-year increase in 2024, reaching 1,180 tons, the highest level in four years. This growth is associated with a renewed focus on gold exchange-traded funds (ETFs), while traditional investments in gold bars and coins have remained stable.
On the supply side, due to increased mining output and recycling activities, the total gold production in 2024 reached a new record of 4,794 tons, up 1% from 2023.
While investing in gold ETFs is a good option for most investors, those with a higher risk tolerance might consider purchasing undervalued gold mining stocks. In recent years, some gold mining stocks have lagged behind the rise in gold prices, making them attractive to value-seeking investors. B2Gold (TSX: BTO) is one such mining stock. Is it worth buying now?
With a market capitalization of $4.75 billion, B2Gold is a gold producer. The company’s performance in the third fiscal quarter of 2024 was mixed. B2Gold anticipates a significant increase in production at its Fekola mine in 2025. The company reported operating cash flow of $118 million in the third fiscal quarter and had $431 million in cash for the current fiscal quarter.
Despite gold prices hovering near historical highs, B2Gold’s stock price has fallen 63% from its peak, offering investors an opportunity to buy on the dip. Additionally, considering the annual dividend of $0.16 per share, the ongoing stock price correction allows shareholders to enjoy a substantial dividend yield of 6.3%.
Analysts also expect B2Gold’s adjusted earnings to increase from $0.21 per share in 2024 to $0.41 per share in 2025. With a price-to-earnings ratio of 8.8, B2Gold’s stock appears quite cheap.
Based on the consensus target price estimate, B2Gold’s current stock price is at a 50% discount. When dividends are considered, the cumulative return over the next 12 months could exceed 55%.
