Investing in gold stocks on the TSX in 2025 requires careful consideration, as the sector can be volatile yet rewarding. So, what should investors watch for before they even consider just one of these gold stocks? Let’s dive in and see whether this company is right for your portfolio.
What to watch
The first thing to look at is a gold stock’s production costs and efficiency. A miner with low all-in-sustaining costs (AISC) per ounce of gold can maintain profitability even if gold prices drop. Companies with strong operational efficiency tend to have better cash flow and stability, making them more attractive to investors.
A company’s reserves are another crucial factor. Gold stocks rely on their reserves to continue production, so investors should assess not just the quantity but also the quality of these reserves. High-grade deposits in politically stable regions reduce operational risks and improve long-term outlooks. Mines in Canada and the U.S. often provide more security compared to those in emerging markets with uncertain regulations.
Financial health plays a significant role in determining the strength of a gold stock. A strong balance sheet with manageable debt levels ensures a company can fund its operations and expansion without excessive dilution or financial distress. Investors should look for gold stocks with solid cash flow, a good current ratio, and the ability to generate positive earnings, even in challenging markets.
Valuation is another important metric to analyze. Compare a company’s price-to-earnings (P/E) ratio, price-to-book ratio, and enterprise value-to-earnings before interest, taxes, depreciation, and amortization (EBITDA) with its peers. This can help determine whether a stock is overvalued or undervalued. Investors should also consider how much of a company’s future potential is already priced into the stock.
Consider the future with the past
Geopolitical risk should always be a consideration. Gold mining operations in regions with political instability, regulatory uncertainty, or economic turmoil can face production halts, increased taxes, or even nationalization. Canadian miners with diversified, lower-risk locations tend to offer more stability and predictability for investors.
A management team with a strong track record is another factor to examine. Experienced leadership that has successfully navigated commodity price fluctuations and executed growth strategies can be a sign of a well-run company. Investors should look at past decisions, cost-control measures, and how management has responded to industry shifts.
Dividend policies can be appealing to long-term investors. While not all gold stocks pay dividends, those that do often indicate financial strength and a commitment to shareholder returns. Companies with consistent or growing dividends suggest stable cash flow, whereas those cutting dividends might be signalling financial stress.
Then, there are exploration and expansion plans to reveal a gold stock’s growth potential. Investors should look at whether a miner is expanding production through new projects or acquisitions. Companies with promising exploration programs or recently discovered high-grade deposits could offer significant upside if they can successfully bring those assets into production.
What about Kinross?
Looking at Kinross Gold (TSX:K), the gold stock is currently trading at about $16 as of writing. The gold stock’s market cap has expanded significantly over the past year, now sitting at $19.23 billion. Kinross reported a strong third quarter in 2024, with revenue up nearly 30% year over year and earnings growth of 223%.
Free cash flow hit a record $450 million, and the gold stock has maintained a solid balance sheet with $488.9 million in cash and a manageable debt load. With a forward P/E of 12.09, Kinross appears to be trading at a reasonable valuation compared to its historical levels. Its dividend yield of 1.09% isn’t high, but it does offer some passive income.
Analysts remain mixed on the gold stock, with some rating it a buy while others believe it may have limited upside after its recent rally. Given its strong financials and production growth, Kinross could be a solid choice, especially for investors looking for exposure to gold. However, also consider its recent price surge. This means it may not be as undervalued as it was a few months ago.