Barrick Gold's Meteoric Rise: Is There Still Value Left in the Mining Giant?
TORONTO – Barrick Gold Corp. (TSX:ABX), the world's second-largest gold miner, has been a standout performer on the TSX, with its shares soaring more than 170% over the past three years. After closing at C$62.24 recently, the stock's monumental run is prompting a critical question among market watchers: has the easy money been made, or does a value opportunity remain on the table?
"The sheer scale of Barrick's performance can distort perspective," said Michael Thorne, a portfolio manager at Veritas Capital. "Investors naturally fear buying at a peak, but disciplined valuation work, not emotion, should guide the decision. Our analysis indicates the market may still be underestimating the company's long-term cash flow potential, particularly given its disciplined capital allocation and tier-one asset base."
A Discounted Cash Flow (DCF) model, which projects future cash generation and discounts it to present value, paints a compelling picture. Using a two-stage Free Cash Flow to Equity model based on analyst estimates extending to 2035, the analysis arrives at an estimated intrinsic value of approximately $184.83 per share. Compared to the recent price, this suggests the stock could be undervalued by roughly 66%.
The price-to-earnings (P/E) ratio offers another lens. Barrick currently trades at a P/E of 21.53x, notably below the Canadian metals and mining industry average of 27.76x and a peer average of 41.66x. A proprietary 'Fair P/E Ratio' for Barrick, calculated based on its growth profile, margins, and risk, sits at 27.40x, further supporting the undervaluation thesis.
Investor Voices: A Divided Street
The debate is lively among retail and institutional investors alike.
Sarah Chen, a retired teacher and long-term shareholder: "I've held Barrick through its ups and downs. The turnaround under the current management, paying down debt and focusing on profitable ounces, is real. The DCF model confirms my belief that this isn't just a gold price story—it's a fundamentally better company trading below what it's worth."
David R. McCullough, hedge fund analyst: "This is classic 'analysis paralysis.' The stock has had a historic run. DCF models are incredibly sensitive to long-term gold price and discount rate assumptions. A slight tweak and that '66% undervalued' figure evaporates. Chasing a stock after a 170% gain based on hypothetical 2035 cash flows is speculative, not prudent."
Arjun Patel, independent financial advisor: "The key takeaway isn't the precise percentage of undervaluation. It's that by two common metrics—DCF and relative P/E—Barrick isn't screamingly expensive despite its performance. For investors underweight commodities or seeking a high-quality hedge, it warrants a closer look, but position sizing is critical given the sector's volatility."
The broader context is crucial. Gold has regained its luster as a hedge against persistent inflation and geopolitical uncertainty. Barrick, with its geographically diversified portfolio and strong balance sheet, is positioned to benefit. However, risks remain, including operational challenges, fluctuating commodity prices, and rising input costs.
Disclaimer: This analysis is based on historical data and analyst projections using standardized methodology. It is not financial advice and does not constitute a recommendation to buy or sell any security. Investors should consider their own objectives and circumstances. Simply Wall St holds no position in the stocks mentioned.