Eldorado Gold’s Recent Weakness Is Temporary

Eldorado Gold [stock_market_widget type="inline" template="generic" color="default" assets="ELD.TO" markup="(TSX: {symbol} {currency_symbol}{price} ({change_pct}))" api="yf"] stock has lost momentum since the beginning of September as the company has run into a few problems. For instance, Greece wants Eldorado to pay higher royalties from its projects and also to provide more jobs. What’s more, Eldorado decided that it will issue $125 million worth of new shares to fund its expansion at the Kisladag mine in Turkey.

All of this has weighed on the stock price, which has dropped over 15% since the beginning of September. But is this an opportunity to buy more shares? Let’s find out.

Positive Preliminary Results from Eldorado

Eldorado Gold will release its next set of quarterly results on Oct. 31, but the company has already released its preliminary report. Eldorado’s preliminary third-quarter report says that its total gold production increased from 84,783 ounces in the prior-year period to 101,596 ounces this time around.

This impressive increase in the company’s production was driven by the Lamaque mine, which delivered just over 32,000 ounces of production during the quarter. In the year-ago period, production at Lamaque stood at just over 13,400 ounces. Production at Kisladag and Efemcukuru also showed a slight increase, while Olympias fell year over year.

Eldorado has maintained its guidance for the full year, but it also points out that Kisladag could perform better in the coming quarters thanks to an extended life of the mine and waste stripping that’s being carried out at the mine to reduce interruptions in production. What’s more, the company will take steps to boost production at the Olympias mine.

Eldorado is boosting output and its efforts are bearing fruit. In fact, analysts expect Eldorado to deliver top-line growth of a whopping 124% year over year in the third quarter to $181 million. The company is also expected to swing from a loss of $0.15 per share a year ago to a profit of $0.12 per share this time around.

All of this indicates that the recent weakness in Eldorado stock could be a good buying opportunity.

More Reasons to Buy

Eldorado Gold is at a good time to buy with its forward price-to-earnings ratio at less than 9, compared to its five-year average forward P/E ratio at 37.

Eldorado Gold is currently trading at a forward price-to-earnings ratio of less than 9. By comparison, the company’s five-year average forward P/E ratio stands at 37. This means that now would be a good time to go long Eldorado given its valuation, the increasing production, and a potential jump in gold prices.

The spot price of gold has been consistently hovering around the $1,500 an ounce mark, and it is widely believed that the price of the precious metal could head higher thanks to the global economic uncertainty and chances of a recession. Goldman Sachs believes that gold is headed to $1,600 an ounce in the fourth quarter of the year and hold that level. Analyst Mikhail Sprogis told Kitco News:

“Going long-term depends on what is going to happen to global growth. The further out you go, the higher the probability that the U.S. is going to hit a recession. We have $1,600 holding out through 2021.”

So, don’t be surprised to see Eldorado Gold get better in the time to come because it is enjoying several catalysts.

Harsh Singh Chauhan has a wealth of experience evaluating publicly-traded companies across several verticals, including technology, oil and gas, retail, and consumer goods. His financial writing has been published across platforms such as The Motley Fool, TheStreet, and Seeking Alpha. Harsh's philosophy is to find great businesses for the long run based on company fundamentals and industry prospects. Address: 682 Indian Road, Toronto, Ontario, M6P 2C9. Phone: 416-721-8257.


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