B2Gold vs. Yamana: Which Stock is a Better Buy?

B2Gold Corp. (BTG) operates as a gold producer with three operating mines in Mali, Philippines, and Namibia. It operates the Fekola Mine in Mali, the Masbate Mine in the Philippines, and the Otjikoto Mine in Namibia. On the other hand, Yamana Gold Inc. (AUY) operates as a precious metal producer. It has gold and silver production, development stage properties, exploration properties, and land positions throughout America.

Since the Fed is expected to raise interest rates several times this year, the opportunity cost of holding non-yielding bullion is expected to increase. However, spot gold was roughly at $1,813.73 per ounce on continued concerns over surging inflation, geopolitical instability, and rising oil prices. The demand for gold is primarily rising because it allows investors to hedge their portfolios against uncertain market conditions. The falling stocks and rising bond yields should drive the safe-haven demand for gold further. Therefore, both BTG and AUY should benefit.

But which of these two stocks is a better buy now? Let’s find out.

Latest Developments

For 2022, BTG remains well-positioned for continued strong operational and financial performance, with total gold production forecast to be between 990,000 - 1,050,000 ounces and consolidated gold production from the Company's three operating mines forecast to be between 950,000 - 1,000,000 ounces.

On November 2, 2020, AUY announced the acquisition of its Wasamac project, and subsequently, on June 14, 2021, it increased its footprint around the project acquiring the Francoeur, Arntfield, and Lac Fortune gold properties. These strategic acquisitions recognize the importance of developing additional core assets located in Canada, with the potential to provide significant upside and attractive returns.

Past and Expected Financial Performance

BTG’s EBITDA and levered FCF grew at CAGRs of 26% and 20.9%, respectively, over the past three years. Analysts expect BTG’s revenue to increase 37.8% for the quarter ending March 31, 2022, and 3.3% in fiscal 2022. The company’s EPS is expected to decline 41.7% for the quarter ending March 31, 2022, and 7.5% in fiscal 2022. However, its EPS is expected to grow at a rate of 20% per annum over the next five years.

On the other hand, AUY’s EBITDA and levered FCF grew at CAGRs of 14.2% and 12.9%, respectively, over the past three years. The company’s revenue is expected to increase 4.2% for the quarter ending March 31, 2022, and 0.2% in fiscal 2022. Its EPS is expected to grow 29.4% for the quarter ending March 31, 2022, and 4.7% in fiscal 2022. However, AUY’s EPS is expected to decline at a rate of 17.1% per annum over the next five years.

Profitability

AUY’s trailing-12-month revenue is 1.03 times what BTG generates. However, BTG is more profitable with a gross profit margin and net income margin of 64.78% and 26.32% compared to AUY’s 61.55% and 7.91%, respectively.

Furthermore, BTG’s ROE, ROA, and ROTC of 17.96%, 13.94%, and 16.70% are higher than AUY’s 1.84%, 6.54%, and 8.98%, respectively.

Valuation

In terms of forward non-GAAP P/E, AUY is currently trading at 13.64x, 44.8% higher than BTG’s 9.42x. Moreover, AUY’s forward EV/S ratio of 2.73x is 41.5% higher than BTG’s 1.93x.

So, BTG is relatively affordable here.

POWR Ratings

BTG has an overall rating of B, which equates to a Buy in our proprietary POWR Ratings system. On the other hand, AUY has an overall rating of C, which translates to Neutral. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.

Also, BTG has a B grade for Value, consistent with its forward P/E of 8.80x, 39.1% lower than the industry average of 14.46x. However, AUY has a C grade for Value, in sync with its forward P/E of 26.31x, 81.9% higher than the industry average of 14.46x.

Moreover, BTG has a grade of A for Quality. This is justified given BTG's 42.83% trailing-12-month EBIT margin, 218.5% higher than the industry average of 13.45%. On the other hand, AUY has a Quality grade of B.

Of the 30 stocks in the Miners - Gold industry, BTG is ranked #4. In comparison, AUY is ranked #9.

Beyond what I’ve stated above, we have also rated the stocks for Sentiment, Momentum, Stability, and Growth. Click here to view all the BTG ratings. Also, get all the AUY ratings here.

The Winner

Rising geopolitical tensions and inflation could increase the safe-haven demand for gold in the upcoming months. While both BTG and AUY are expected to gain, it is better to bet on BTG now because of its lower valuation and higher profit margin.

Our research shows that odds of success increase when one invests in stocks with an Overall Rating of Strong Buy or Buy. View all the other top-rated stocks in the Miners - Gold industry here.

AUY shares were trading at $4.11 per share on Monday afternoon, up $0.12 (+3.01%). Year-to-date, AUY has declined -2.61%, versus a -5.07% rise in the benchmark S&P 500 index during the same period.

Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles.

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