AngloGold Ashanti (AU) Stock Drops to One-Year Low as Gold Prices Decline

Andrew Meola

10/30/14 – 03:29 PM EDT

NEW YORK (TheStreet) — Shares of AngloGold Ashanti 
(AU)  fell more than 6% to a 52-week low of $8.47 on Thursday as gold prices dropped to less than $1,200 an ounce for the first time since October 3.

Gold for December delivery fell 2.2% to $1,198.60 an ounce. The decline stemmed partially from the Federal Reserve’s announcement that it would end its QE3 bond buying program.

The news that the Fed had nixed the stimulus program indicated its confidence in the recovery of the U.S. economy, which grew 3.5% in the third quarter thanks to an increase in exports and federal spending.

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More than 4.7 million shares had changed hands as of 3:27 p.m., compared to the average volume of 2,534,990.

Separately, TheStreet Ratings team rates ANGLOGOLD ASHANTI LTD as a “sell” with a ratings score of D+. TheStreet Ratings Team has this to say about their recommendation:

“We rate ANGLOGOLD ASHANTI LTD (AU) a SELL. This is driven by multiple weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company’s weaknesses can be seen in multiple areas, such as its generally high debt management risk, poor profit margins and generally disappointing historical performance in the stock itself.”

Highlights from the analysis by TheStreet Ratings Team goes as follows:

• The debt-to-equity ratio of 1.24 is relatively high when compared with the industry average, suggesting a need for better debt level management.
• The gross profit margin for ANGLOGOLD ASHANTI LTD is currently lower than what is desirable, coming in at 33.14%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -5.91% is significantly below that of the industry average.
• AU’s stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 38.71%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock’s sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
• The company’s current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Metals & Mining industry and the overall market, ANGLOGOLD ASHANTI LTD’s return on equity significantly trails that of both the industry average and the S&P 500.
• ANGLOGOLD ASHANTI LTD reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, ANGLOGOLD ASHANTI LTD swung to a loss, reporting -$6.07 versus $1.70 in the prior year. This year, the market expects an improvement in earnings ($0.51 versus -$6.07).
• You can view the full analysis from the report here: AU Ratings Report

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