Value investing is built on a straightforward premise: find companies trading below their intrinsic worth and hold them while the market eventually closes the gap. A practical way to implement that discipline is through a Decent Value screen, which seeks out stocks with strong valuation metrics while still requiring acceptable profitability, financial health, and growth. One name that surfaces from this methodology is ANGLOGOLD ASHANTI PLC (NYSE:AU), a multinational gold producer with operations spanning Africa, Australia, and the Americas.
What the Decent Value Screen Looks For
The Decent Value approach sits at the intersection of price and quality. A low valuation alone can be a trap if the underlying business is deteriorating or burdened by weak fundamentals. To avoid that, the screen requires a company to show a solid valuation score while also maintaining reasonable profitability, a healthy balance sheet, and at least some growth momentum. In essence, it searches for quality businesses that the market has underpriced.
For AngloGold Ashanti, the fundamental report supports this profile. The stock earns a valuation rating of 8 out of 10, alongside a profitability score of 8 and a health score of 7. Growth is more moderate at 4, but the combination of cheapness and quality is what makes the stock relevant for value-focused investors.
Valuation: The Core Attraction
The most compelling argument for AngloGold Ashanti is its valuation. Trading at a price-to-earnings ratio of 10.48, the stock looks inexpensive both against its industry peers and the broader market. The picture improves further on a forward basis, with a price-to-forward earnings ratio of 7.79. To put that in context:
- Roughly 84% of companies in the Metals & Mining industry are more expensive based on trailing earnings.
- About 77% of industry peers are more expensive on forward earnings.
- The S&P 500 trades near 26.35 times earnings, making AngloGold Ashanti considerably cheaper by comparison.
- The price-to-free-cash-flow ratio also ranks favorably, with over 94% of industry peers valued at higher multiples.
The valuation score also incorporates a compensation-for-growth component, noting that the low PEG ratio indicates a cheap price relative to expected earnings expansion. Analysts expect earnings to grow by 22.30% in the coming years, which could justify a re-rating if realized. Investors who want a deeper look at the underlying data can review the full fundamental analysis report.
Profitability and Financial Health
A low price only matters if the business underneath is sound. AngloGold Ashanti delivers on that front with strong profitability metrics. The return on equity stands at 40.70%, outperforming 98% of industry peers, while return on assets is 22.12% and return on invested capital is 25.93%. Margins are equally solid, with an operating margin of 47.35% and a profit margin of 31.11%.
The balance sheet also supports the value thesis. The company carries an Altman-Z score of 6.12, indicating low bankruptcy risk, and a debt-to-free-cash-flow ratio of just 0.57, meaning it could theoretically pay off all its debt in under a year of free cash flow generation. Current and quick ratios of 2.71 and 2.11, respectively, show no near-term liquidity concerns.
Key fundamental evidence at a glance
- Valuation: PE of 10.48, forward PE of 7.79, cheap versus industry and S&P 500
- Profitability: ROE of 40.70%, ROIC of 25.93%, operating margin of 47.35%
- Health: Altman-Z of 6.12, debt/FCF of 0.57, current ratio of 2.71
- Growth: EPS up 122.46% in the past year, revenue up 70.78% over the same period
Growth: Impressive Past, Cautious Outlook
Value investors do not require explosive growth, but some momentum helps ensure the company is not a deteriorating asset. AngloGold Ashanti has shown strong recent performance, with earnings per share growing 122.46% over the past year and 17.16% annually over a longer period. Revenue growth followed a similar path, expanding 70.78% in the last year.
However, the forward picture is less certain. Estimates point to a potential average annual decline of 3.22% in earnings per share and a 1.75% decline in revenue over the coming years. This explains the moderate growth rating of 4 and serves as a reminder that the market may be pricing in a cyclical slowdown. For value investors, this is a risk to monitor rather than a disqualifying factor, especially since the stock remains cheap on forward earnings despite those estimates.
A Value Candidate Worth Monitoring
The Decent Value screen is designed to highlight stocks that offer a favorable risk-reward balance for value investors. AngloGold Ashanti fits that description_short well: it combines a cheap valuation with strong profitability, a healthy balance sheet, and recent growth momentum. The main uncertainty lies in the forward growth outlook, which could keep the stock range-bound if commodity prices soften.
For investors who want to identify other companies that match this disciplined approach, a broader list of stocks passing the same screen criteria is available.
Disclaimer: This article is for informational and educational purposes only and does not constitute financial advice or a recommendation to buy or sell any security. Always conduct your own research and consider your risk tolerance before making investment decisions.
Read full article here »
View the Zacks #1 Rank List
AngloGold Ashanti (NYSE:AU): A Decent Value Play in Gold Mining
Value investing is built on a straightforward premise: find companies trading below their intrinsic worth and hold them while the market eventually closes the gap. A practical way to implement that discipline is through a Decent Value screen, which seeks out stocks with strong valuation metrics while still requiring acceptable profitability, financial health, and growth. One name that surfaces from this methodology is ANGLOGOLD ASHANTI PLC (NYSE:AU), a multinational gold producer with operations spanning Africa, Australia, and the Americas.
What the Decent Value Screen Looks For
The Decent Value approach sits at the intersection of price and quality. A low valuation alone can be a trap if the underlying business is deteriorating or burdened by weak fundamentals. To avoid that, the screen requires a company to show a solid valuation score while also maintaining reasonable profitability, a healthy balance sheet, and at least some growth momentum. In essence, it searches for quality businesses that the market has underpriced.
For AngloGold Ashanti, the fundamental report supports this profile. The stock earns a valuation rating of 8 out of 10, alongside a profitability score of 8 and a health score of 7. Growth is more moderate at 4, but the combination of cheapness and quality is what makes the stock relevant for value-focused investors.
Valuation: The Core Attraction
The most compelling argument for AngloGold Ashanti is its valuation. Trading at a price-to-earnings ratio of 10.48, the stock looks inexpensive both against its industry peers and the broader market. The picture improves further on a forward basis, with a price-to-forward earnings ratio of 7.79. To put that in context:
The valuation score also incorporates a compensation-for-growth component, noting that the low PEG ratio indicates a cheap price relative to expected earnings expansion. Analysts expect earnings to grow by 22.30% in the coming years, which could justify a re-rating if realized. Investors who want a deeper look at the underlying data can review the full fundamental analysis report.
Profitability and Financial Health
A low price only matters if the business underneath is sound. AngloGold Ashanti delivers on that front with strong profitability metrics. The return on equity stands at 40.70%, outperforming 98% of industry peers, while return on assets is 22.12% and return on invested capital is 25.93%. Margins are equally solid, with an operating margin of 47.35% and a profit margin of 31.11%.
The balance sheet also supports the value thesis. The company carries an Altman-Z score of 6.12, indicating low bankruptcy risk, and a debt-to-free-cash-flow ratio of just 0.57, meaning it could theoretically pay off all its debt in under a year of free cash flow generation. Current and quick ratios of 2.71 and 2.11, respectively, show no near-term liquidity concerns.
Key fundamental evidence at a glance
Growth: Impressive Past, Cautious Outlook
Value investors do not require explosive growth, but some momentum helps ensure the company is not a deteriorating asset. AngloGold Ashanti has shown strong recent performance, with earnings per share growing 122.46% over the past year and 17.16% annually over a longer period. Revenue growth followed a similar path, expanding 70.78% in the last year.
However, the forward picture is less certain. Estimates point to a potential average annual decline of 3.22% in earnings per share and a 1.75% decline in revenue over the coming years. This explains the moderate growth rating of 4 and serves as a reminder that the market may be pricing in a cyclical slowdown. For value investors, this is a risk to monitor rather than a disqualifying factor, especially since the stock remains cheap on forward earnings despite those estimates.
A Value Candidate Worth Monitoring
The Decent Value screen is designed to highlight stocks that offer a favorable risk-reward balance for value investors. AngloGold Ashanti fits that description_short well: it combines a cheap valuation with strong profitability, a healthy balance sheet, and recent growth momentum. The main uncertainty lies in the forward growth outlook, which could keep the stock range-bound if commodity prices soften.
For investors who want to identify other companies that match this disciplined approach, a broader list of stocks passing the same screen criteria is available.
Disclaimer: This article is for informational and educational purposes only and does not constitute financial advice or a recommendation to buy or sell any security. Always conduct your own research and consider your risk tolerance before making investment decisions.
Read full article here »