Is B2Gold Stock Worth a Buy These Days?

Gold bullion on a chart
Image source: Getty Images.

Written by Daniel Da Costa at The Motley Fool Canada

As is the case with most stocks on the TSX today, it’s been an up-and-down year for B2Gold (TSX:BTO) stock, one of the top gold producers in Canada.

After starting the year off strong and gaining over 20% by mid-April, B2Gold began to see a significant and sustained selloff.

By the time it bottomed in early October, it was down over 18% year to date, a significant fall from the gains it had made to start the year.

This just goes to show, though, how closely B2Gold’s share price is following the price of gold. Gold prices were rallying to start the year as many investors and economists were predicting an end to rate hikes and a potential recession beginning.

By April, it was clear that a recession was still a way off, and with continued interest rate increases this year, the price of gold once again sold off significantly.

Gold is influenced by interest rates because as rates increase and more investments offer higher and more attractive yields, gold becomes less in demand since holding the precious metal offers no yield of its own.

Over the last month, though, gold has been aided by two significant factors, which is why we’ve started to see a rebound both in the price of the precious metal and the price of many gold stocks.

So, with B2Gold rapidly recovering over the last month and a half, up more than 11%, is the stock worth a buy these days?

Is gold on the verge of a significant rally?

Before we can decide if now is the time to buy B2Gold stock, it’s important to understand why exactly it’s been rallying so much over the last month and a half. This way, we can begin to assess whether the rally is sustainable.

I mentioned earlier that gold prices were rallying due to two significant factors. The first is due to the rise in demand we see for gold when a conflict or war breaks out, as we’ve seen since early October. Gold is a safe-haven asset, so typically, when geopolitical tensions rise, gold prices can see an increase.

In addition, though, many analysts and economists believe that, for the most part, rate hikes are finished. This is something that many have tried to predict for over a year and has lasted longer than initially expected.

But with inflation finally cooling and the labour market starting to ease, now could finally be the time that interest rates peak and the downward pressure on gold prices ease.

As much of the reasons for the rally in B2Gold stock is relevant, though, it’s even more important to understand why the company is such a great investment and how much its true value is, to see how much potential it does have should the environment for gold prices continue to improve.

Why is B2Gold one of the best stocks to buy now?

When it comes to mining for gold, one of the most important competitive advantages that a company can have is low production costs. Considering that B2Gold is one of the lowest-cost producers in Canada, it’s certainly one of the top gold stocks to buy in the sector.

For example, in the third quarter of this year, B2Gold’s total cash costs, including royalties, were just US$827 per ounce of gold. Meanwhile, its all-in-sustaining costs were just US$1,272 per ounce.

Plus, in addition to the consistently low operating costs, B2Gold is also constantly looking at how it can most effectively improve its production each year. With a significant acquisition earlier this year, B2Gold now has plenty of long-term growth potential, especially as it continues to pour hundreds of millions of capex into expanding its operations.

On top of its impressive operations, though, B2Gold is also trading significantly undervalued. For example, it currently trades at a forward enterprise value to earnings before interest, taxes, depreciation and amortization ratio of just 3.5 times. That’s well below both its five and 10-year averages of 4.3 and 6.2 times, respectively.

Plus, with the stock still trading undervalued, it currently offers a yield of more than 5.2%. Therefore, there’s no question that B2Gold looks like one of the best stocks to buy now.

The post Is B2Gold Stock Worth a Buy These Days? appeared first on The Motley Fool Canada.

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Fool contributor Daniel Da Costa has positions in B2Gold. The Motley Fool recommends B2Gold. The Motley Fool has a disclosure policy.