Two major factors that could drive the B2gold share price
Shares in B2gold (TSE:BTO) are currently trading at C$6.02, but a key question for investors is how much the current economic uncertainty will affect the price.
One way of making that assessment is to look at the profile of the stock to see where its strengths are. The encouraging news is that B2gold has at least some of the traits that are often associated with two influential drivers of investment returns: high quality and a relatively cheap valuation.
To understand where they show up, here's a closer look:
Quality at a reasonable price
Good quality stocks are loved by the market because they're more likely to be solid, dependable businesses. Profitability is important, but so is the firm's financial strength. A track record of improving finances is essential.
One of the quality metrics for B2gold is that it passes 9 of the 9 financial tests in the Piotroski F-Score. The F-Score is a world-class accounting-based checklist for finding stocks with an improving financial health trend. A good F-Score suggests that the company has strong signs of quality.
While quality is important, no-one wants to overpay for a stock, so an appealing valuation is vital too. With a weaker economy, earnings forecasts are unclear right across the market. But there are some valuation measures that can help, and one of them is the Earnings Yield.
Earnings Yield compares a company's profit with its market valuation (worked out by dividing its operating profit by its enterprise value). It gives you a total value of the stock (including its cash and debt), which makes it easier to compare different stocks. As a percentage, the higher the Earnings Yield, the better value the share.
A rule of thumb for a reasonable Earnings Yield might be 5%, and the Earnings Yield for B2gold is currently 20.9%.
In summary, good quality and relatively cheap valuations are pointers to those stocks that are some of the most appealing to contrarian value investors. It's among these shares that genuine mis-pricing can be found. Once the market recognises that these quality firms are on sale, those prices often rebound.
You should be. The screen that has helped unearth the stock idea detailed in this article is just one of the many tools available at Stockopedia that can help make you a better investor.
Powered by years of research and huge volumes of data analysis which are normally not available to private investors, we have developed the tools that will give you a better chance of beating the market.
What are you waiting for. Click here to sign up to your free trial today.
Stockopedia helps individual investors make confident, profitable choices in the stock market. Our StockRank and factor investing toolbox unlocks institutional-quality insights into thousands of global stocks. Voted “Best Investment Research Tools” and “Best Research Service” at the 2021 UK Investor Magazine awards.