We recently compiled a list of the 7 Best Canadian Stocks Under $20. In this article, we are going to take a look at where Equinox Gold Corp. (NYSE:EQX) stands against the other Canadian stocks under $20.
What’s Happening in the Canadian Stock Market?
The Canadian economy is beginning to settle down as inflation is on a steady downward trend and the Bank of Canada has also taken an easier policy stance, thereby paving the way for stronger economic growth moving forward. On July 19, Reuters reported that the Bank of Canada cut its overnight interest rates by 25 basis points to 4.5% based on the expectation that inflation will continue to fall.
Inflation rates in Canada cooled a little more than expected making interest rate cuts more likely. On July 16, as per Reuters, June 2024 Consumer Price Index (CPI) cooled down to 2.7% a 0.1% decrease month-over-month thereby paving the way for an interest rate cut.
As a result of the interest rate cut, the Canadian stock market was seen performing better. On August 16, Reuters reported that the Canadian stock index ended higher on Friday and witnessed its biggest weekly advance of the year. Investors globally have been cheering the recent signs of the US economic resilience and the recent record high gold prices also boosted the mining sector
The S&P/TSK composite index ended up 0.1% at 23,054.61, posting a seven-day gain streak, recorded as the longest daily winning streak since April 2023.
Looking at a sectoral analysis, the materials group that comprises metal minerals and fertilizer companies was up 1.5% as the price of gold went up by 2% to an all-time high. Moreover, the financial market, which contributed 29% to TSK weighting, grew by 0.6%. The energy sector was a drag, however, and fell 1.1% due to lower oil prices, which settled at $76.65 1.9% lower than expected. The weaker price of oil was mainly attributed to slower demand from China.
On August 13, Ross Healy, chairman of Strategic Analysis Corporation and portfolio manager at MacNicol & Associates Asset Management, appeared on Bloomberg to discuss the performance of TSK and the US stock market. Ross Healy, mentioned that the Canadian stock market is trading at 1.5 times its adjusted book value, whereas the NASDAQ is trading at 9.5 times its book value. Mentioning these numbers Ross Healy, stated that for investors looking to invest for 5 years or longer, the Canadian stock market looks more lucrative due to its potential for growth and the portfolio of stocks it has to offer.
Ross Healy, further believes that we have had a long US advantage and now the market is heading towards a Canadian advantage. Moreover, the precious metal and gold options in the TSK index make the market poised for growth in the long term. Ross Healy, while stating his bull case for gold companies mentioned that companies that have good money on their balance sheets and have been able to find underdeveloped projects to work on have been successful when compared to their competitors.
Our Methodology
To compile the list of 7 best Canadian stocks under $20 we used the Finviz screener. We used the screener to filter out Canadian Stocks that were trading under $20 and sorted them by their market capitalization to get a consolidated list of stocks. Next, we ranked these stocks based on the average price target upside as per Wall Street analysts. The stocks are ranked in ascending order of the average price target upside, as of August 18. Moreover, we have also mentioned the share price of each stock as of August 18, 2024.
At Insider Monkey we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Aerial view of a large-scale gold mine, showing the extent of the company’s operations.
Equinox Gold Corp. (NYSE:EQX)
Average Price Target Upside as of August 18: 34.17%
Share Price as of August 18: $5.43
Equinox Gold Corp. (NYSE:EQX) is a mining company based in Vancouver, Canada. The company focuses on finding and extracting gold and silver from different locations in the Americas. During the first six years of its establishment, the company has acquired one mine and two mining companies, built three mines of its own, and is also commissioning one of the largest new gold mines in Canada. Equinox Gold Corp. (NYSE:EQX) currently has 7 producing mines, three extraction projects, and one mine in commissioning. From these mining operations, the company has produced approximately 19 million ounces of Proven and Probable (P&P) gold reserves and around 17 million ounces of Measured and Indicated (M&I) gold reserves.
During the second quarter of 2024, Equinox Gold Corp. (NYSE:EQX) produced 122,221 ounces of gold at an average realized price of $2,328 per ounce. The revenue of the company amounted to $269.4 million, a slight decrease year-over-year. The production was impacted by some challenges in its Mesquite and Aurizona mines. Regardless, Equinox Gold Corp. (NYSE:EQX) was able to generate $204 million in net income and has updated its 2024 guidance to 655,000-750,000 ounces of gold.
Management has positioned itself for significant growth with strategic acquisitions and ongoing projects. The second quarter marked a significant step characterized by the first gold pour at the Greenstone mine. This was a significant step as the company now owns 100% of the mine after recently buying a 40% share from its partner. The asset is expected to start production in the next quarter contributing significant growth to the company’s production line.
Equinox Gold Corp.’s (NYSE:EQX) competitive edge comes from its diverse portfolio and its ability to generate revenue. During the past 5 years, the company has been able to improve its revenue by 61%. Moreover, EQX is also cheap at current levels as it is trading at 15 times its forward earnings, a 9% discount to its sector. 9 analysts have a Consensus Buy rating on the stock, with their median price target of $7.29 implies an upside of 34.17%% from the current level.
Massif Capital made the following comment about Equinox Gold Corp. (NYSE:EQX) in its Q1 2023 investor letter:
“Equinox Gold Corp. (NYSE:EQX) was our best-performing investment during the first quarter, returning 57%, outperforming the broader gold sector as measured by the GDX and GDXJ by more than 40% and outperforming gold by roughly 50%. The outperformance was not driven by fundamental factors at the company but rather by a combination of sector sentiment and a beta to the gold price of 3.1. We believe that fundamental factors, specifically the conclusion of construction and eventual ramp-up of the Greenstone mine during the first half of next year, represent potent catalysts for EQX, but this quarter’s appreciation was not fundamentally driven.
While we are pleased with the excellent performance during the first quarter, we would be remiss if we did not point out that the stock remains well below the high of roughly $13.50 achieved in 2020, a price at which we owned the stock. While we are in the black on the position despite a 62% fall from the stock peak, our failure to exit the position at that time remains a painful portfolio management misstep…”
Overall EQX ranks 7th on our list of the best Canadian stocks under $20. While we acknowledge the potential of EQX as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than EQX but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
