Over the next 6 years, Sandstorm Gold shares will need to reach $9 to achieve average annual stock market performance of 9.0%. Sandstorm Gold’s stock price will need to reach $11 by 2029 to achieve upper quartile performance. At the current price of $5, what are market expectations regarding Sandstorm Gold’s future operating performance?
Executive Summary
- Sandstorm Gold’s important characteristics: above average expected growth, above average financial strength, average profitability, and low stability. A big positive influence on Sandstorm Gold’s valuation is its superior Growth.
- Very low valuation, lagging shareholder returns. Current valuation levels are very low relative to the Sandstorm Gold Peer Group. Recent market returns have substantially underperformed the Sandstorm Gold Peer Group. Total shareholder returns expected to lag the overall equity market. Based on current investor expectations, Sandstorm Gold shares should reach a level of $8 by 2029 — an 8.0% per year total shareholder return. A 2029 stock price of $9 would reflect median performance and a price of $11 would be required to reach upper quartile performance.
- Growth has been Sandstorm Gold’s biggest valuation strength. Historical growth has been very high relative to the Sandstorm Gold Peer Group and forecasted growth is relatively high. Asset Growth, and Equity Growth have been superior. These factors have buoyed market perceptions of Sandstorm Gold. Sandstorm Gold’s historical income statement growth has been lower than balance sheet growth. Revenue growth has fallen short of asset growth; earnings growth has fallen short of equity growth driving erosion in return on equity.
- Asset Turnover is group lagging. This factor has negatively affected market perceptions of Sandstorm Gold. The company has very low cash and will have to work to generate attractive investments and improve valuation.
- Sandstorm Gold’s risk profile is favorable. Overall variability has been relatively low with relatively low revenue variability, only average E.P.S. variability, and very high stock price volatility. Financial Strength is only average and earnings’ expectations are relatively very high. The debt/capital ratio has risen very significantly.
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