South African multinational gold mining company, AngloGold Ashanti (NYSE:AU), recently experienced an 18% surge in its stock price within the past month. This unexpected rise has prompted a thorough examination of the company's financials, including its Return on Equity (ROE) which stood at a modest 1.2% for the twelve months trailing to June 2023.
The ROE, a measure of financial performance calculated by dividing net income by shareholders' equity, indicates that the firm made a $0.01 profit for each $1 shareholder investment. This figure significantly underperformed when compared to the industry average ROE of 11%.
Despite this seemingly low profitability, AngloGold Ashanti has managed to achieve a net income growth of 9.2% over the past five years. This growth rate, however, is still lower than the industry average of 27%, indicating that the company's earnings expansion has been relatively modest compared to its peers.
The company's median payout ratio over the past three years stands at 24%, a figure projected to rise to 35% over the next three years according to analyst forecasts. The payout ratio is a key indicator of a company's ability to sustain its dividend payments.
Even with these figures in mind, analysts predict an optimistic future for AngloGold Ashanti, with expectations of an increase in ROE to 14%. The Price-to-Earnings (P/E) ratio will be instrumental in determining whether this anticipated earnings expansion is already accounted for in the current share price.
For more detailed projections and analysis of AngloGold Ashanti's financial performance, interested parties are directed towards the relevant analyst forecasts.
InvestingPro Insights
A closer look at InvestingPro's real-time data reveals that AngloGold Ashanti has a market cap of $7710 million and a high P/E ratio of 196.27, suggesting that investors are willing to pay a high price for its earnings. The company's revenue for the last twelve months as of Q2 2023 was $4532 million, with a growth rate of 7.42%.
InvestingPro Tips suggest that the company is experiencing a declining trend in earnings per share and is trading at a high earnings multiple. However, it has shown significant return over the last week and the last month, indicating potential short-term gains for investors. Moreover, the company's liquid assets exceed short term obligations, which suggests financial stability.
InvestingPro provides additional tips and insights on companies like AngloGold Ashanti. For example, there are currently 10 more tips available for this company on InvestingPro's platform, which could further aid investors in making informed decisions.
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