3 Gold Stocks Trading Under $5

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2021 has been an interesting year for the stock markets so far, with unprecedented trading strategies driving the prices of lesser-known stocks, while tech giants are witnessing a staggering dip. This has helped the equity markets reach new highs in terms of trading volumes as well as bolstered the performance of benchmark indices, as reflected in NASDAQ’s 7.5% returns year-to-date.

However, this has triggered a subsequent rise in volatility, given the unpredictable market movements over the past month.

Why is Gold Making a Rebound?

Given the current market conditions, safe-haven asset gold has gained prominence once again, as people are betting on gold derivatives to capitalize on the surging volatility. Moreover, several macroeconomic factors such as weak US-dollar and expansionary fiscal and monetary policies have contributed to the rising demand for the precious metal.

Central banks across the world have adopted a dovish monetary stance for almost a year, with near-zero interest rates and quantitative easing policies creating inflationary pressures. The weakened US dollar has broadened the trade deficit in the U.S. significantly, accounting for 17.7% of the GDP last year, the highest in 12 years. These factors combined allowed gold prices to rise 24.43% in 2020.

According to a report from Kitco, gold prices might touch $2,100/ounce in 2021. While gold prices have gained slightly since January 11th, a potential market correction is expected to kickstart the rally soon. Investors willing to profit off of this imminent trend can choose from this diverse penny stocks list having direct exposure to the gold industry.

Equity investments in the safe-haven asset can help investors reap maximize their returns, given the limitations of physical gold investments and passively managed gold ETFs tracking broader market returns.

Some of the best gold penny stocks having significant untapped potential are -

Gold Resource Corporation (NYSE American - GORO)

GORO is a mining company with operations based across four major properties in Mexico and Nevada. Currently trading at $3.03, the stock has gained 7.45% over the past five months, and 4.21% year-to-date.

While the company had to halt its operations completely in the initial days of the pandemic due to the lockdown and social distancing protocols, it still managed to generate $130.74 million in revenues over the past 12 months. The stock has a gross profit margin of 34.76%, which is nearly 700 basis points higher than the industry average.

The company has delivered impressive results over the long term, as its revenues increased at a CAGR of 11.19% over the past three years. Its leveraged cash flow margin nearly doubled over the same period.

In terms of technical parameters as well, GORO is well-positioned. It is currently trading above its 50-day and 200-day moving averages of $2.98 and 3.14, depicting a bullish outlook.

Iamgold (NYSE - IAG)

IAG is another gold mining company, with a more diverse operational range. The company owns and operates properties in Canada, South America, and West Africa. It is one of the most profitable penny stocks trading under $5, with a trailing twelve revenue balance of $1.19 billion.

IAG’s gross profit over this period was $191.50 million, reflecting a gross margin of 16.12%. Furthermore, the company’s EPS has increased by nearly 200% year-over-year, while EBITDA margin 76.3% compared with its year-ago period.

IAG stock has gained 25.27% over the past year to close yesterday’s trading session at $3.52. However, given the stock’s financial growth over this period, it is relatively undervalued.

Analysts expect IAG’s EPS to rise 74.31% in fiscal 2021, while consensus revenue estimates indicate a 15.27% improvement this year. The bullish analyst sentiment in a favorable industry backdrop should allow the stock to reach new highs this year.

Harmony Gold Mining Company Limited (NYSE - HMY)

HMY is a mining company headquartered in Africa, known for its assorted gold mining, extraction and processing related services. It also operates minefields and associated projects in Papua New Guinea. Currently trading at $4.32, HMY has a market capitalization value of $2.52 billion.       

HMY generated $1.68 billion in revenues in the trailing 12-months, reflecting a compounded growth of 14.48% over the past three years. The company has scaled its assets significantly over this period, allowing it to generate profits for the first time. HMY’s total assets increased at a CAGR of 4.75% over the past three years. HMY’s trailing 12-month gross profit stood at $396.62 million.

HMY has gained 35.85% over the past year, outperforming the benchmark S&P 500 index. However, the stock is still relatively undervalued, in comparison to the sector median. Its forward P/E ratio of 4.92x is 75.87% lower than the industry average of 20.38x. Given the optimistic broader market sentiment driving the gold industry, HMY is poised to witness substantial rise in the upcoming months.

Thus, these three gold penny stocks are some of the best investment bets for investors seeking to strike a balance in the risk to return exposure.

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