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goldminingXpert (29.76)

GMX upgrades Jaguar Mining to Strong Buy (JAG)

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August 11, 2008 – Comments (11) | RELATED TICKERS: JAGGF , GLD

I am officially upgrading the Concord, NH based Jaguar Mining company to Strong Buy on the strength of today's earnings announcement. The company made 9 cents per diluted share vs. a loss last year and a mere 1 penny per share last quarter. The company has ramped up production and is opening another mine later this year. Based on this strength, I see revenue continuing to grow sharply for the next few years. The company will mine somewhere in the range of 150,000 oz of gold this year-- they are moving towards an eventual goal of 700,000 oz a year. I trust management to complete this goal seeing as how the competent management has driven this stock price from under a dollar to $14 before falling back (check out the chart of Jag.to--the Canadian listing--the American listing showed up much later.)

As revenue rose 86% this quarter vs. last year, we can see the company is continuing growth at a tremendous pace. The stock has gotten battered due to the selloff in precious metals and a recent report that a problem at one of JAG's mines would slightly slow production. However, even if revenue growth slows to 60% a year or so this is still sufficiently fast to promote more value creation at JAG. If earnings remain at 9 cents a share for the next three quarters, we get full-year earnings of 36 cents, leading to a P/E in the high-teens. This is below industry average significantly. However, earnings are growing sharply. I project 21 cents of earnings for the upcoming quarter and I believe a forward P/E of around 10 is accurate.

One note of caution, as the USD continues to rally, the value of American shares of JAG will rise more slowly than Canadian shares of JAG (JAG.to). As the exchange rate rises, the Canadian shares will necessarily rise more quickly. No problem though, with a 1-year price target of $14 CAD for JAG, this translates to $12.60 per American share assuming a USD/CAD ratio of 1.1. Assuming the stock opens below $7 tomorrow (you can hope--it may gap much higher on tonight's positive news) a 60 to 80% gain is possible by buying JAG shares.

11 Comments – Post Your Own

#1) On August 11, 2008 at 7:45 PM, goldminingXpert (29.76) wrote:

Disclosure: GMX is long 200 shares of JAG at 9 and 350 shares at 6.45

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#2) On August 12, 2008 at 12:29 AM, bullrun18 (85.34) wrote:

great post.  I picked up 150 shares at the devil's price $6.66.  I see a huge upside to this stock.  Its 52 week low is 4.95, but in the 5.30ish range if you discount the temporary low it set for a few minutes.  I will buy more if we ever come close to testing the low.  

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#3) On August 12, 2008 at 9:29 AM, Jro81 (< 20) wrote:

Buy Buy Buy ..... look at MFN/MFL.to as well ... It is going to earn $1.50 next year ... It has been killed as well ... That is on an $8 stock ...

Jared

P.S.  I own MFL.to and I am long gold the double long index (HGU.to)

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#4) On August 12, 2008 at 12:02 PM, goldminingXpert (29.76) wrote:

MFN is good and is nice for diversification as it should rise to around 12, but if you are only going to own one gold stock, JAG is the one.

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#5) On August 12, 2008 at 9:33 PM, dexion10 (27.79) wrote:

what is your favorite Gold stock. I went long ABX and the GLD in Caps so I need some more picks to average down into - but I don't want to be to speculative regarding new production any thoughts?

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#6) On August 12, 2008 at 9:58 PM, goldminingXpert (29.76) wrote:

JAG is far and away my favourite. NXG and KGC are also worth a look at these levels.

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#7) On August 13, 2008 at 11:26 AM, Collin757 (< 20) wrote:

sell gold if it hits 900 short term?

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#8) On August 15, 2008 at 12:22 PM, MLGtrader (99.24) wrote:

Nice stock, I might just have to load up.  I was looking for a solid gold play, and I love small cap growth...perfect.

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#9) On August 16, 2008 at 11:27 AM, jumbofaceplate (55.14) wrote:

It seems as if there is more contraction in the M2 money supply than what is being given out by the Feds at the discount window. Given the deflationary nature of this loss in wealth, should I wait to buy JAG hoping for the price of gold to slide in the near future as well as the price of JAG, or is the situation compelling enough to buy now?

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#10) On August 18, 2008 at 10:27 AM, MLGtrader (99.24) wrote:

The reason for the recent strength in the dollar is that the market realized Europe sucks because they released negative GDP growth last quarter.  Basically, people think the US is not as screwed compared to Europe and the rest of the world.  Investors think that since the US market has already faced so much weakness, most of it could already be over.  Just so you know, its not better if the rest of the world is worse off, it means that there is no one to trade to.

The money supply isn't being tightened.  The lending window is still open for several financial institutions to borrow however much they need.  The interest rate remains at 2%, and the fed will lower it before it raises it (showing that we are just getting started in this whole mess).  

So I think gold is a good investment now.  I bought a bunch of JAG on Friday at $6.60.

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#11) On August 19, 2008 at 6:02 AM, goldminingXpert (29.76) wrote:

that was a fun move to $7.50 before going right back to $6.50 again where I bought in. Hopefully gold can get back above $800/oz and base there so JAG can find some strength.

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