Northern Star Shares Up 32% But Still Has Room to Grow

Goldminer Northern Star Resources [ASX:NST] jumped 1.7% this morning to $4.78 per share. The billion-dollar miner is now up 32% for the year.

What caused share price to spike?

This morning, NST leased its June quarterly activity report. The goldminer said it was on track for record gold production of 154,116 ounces in the June quarter, and 514,735 ounces in FY17.

Higher production also helped drive costs down for the quarter to AU$938 per ounce. NST Chairman Bill Beament said:

The superb performances of the Jundee and Kalgoorlie operations is a direct result of the investment we have made in exploration and the production growth at these tier-one assets.

We are now reaping the rewards of this investment, as shown by the significant increase in our FY18 production guidance, and we will continue to do so for many years to come.

What now for Northern Star shares?

NST’s share price now already reflects its production increase and earnings performance. If you’re looking for a short-term investment, NST might not be the stock for you. But if you’re willing to hold on for five to 10 years NST might be worth looking at.

I say that because of the company’s extremely high return on equity (ROE) and return on invested capital (ROIC). If you’re unfamiliar with these two metrics, think of ROE as the return a business can make on what shareholders have put into the business, and ROIC as the quality of the business and its management.

From 2011-16, NST averaged a ROE of 42% and a ROIC of 37%. In isolation, those figures might not mean much. But if we compare this to the industry average ROE of 18%, and ROIC of 16%, NST’s figures look extremely impressive.

Like I said, this stock could be one for you if you’re a long-term investor.


Härje Ronngard,

Junior Analyst, Money Morning

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Harje Ronngard is the lead Editor at Money Morning. He’s also the Editor of Wealth Eruption and Gold & Commodities Stock Trader, and co-Editor of the Third Wave Portfolio.

The aim of both Wealth Eruption and the Third Wave Portfolio is to find misunderstood opportunities. These are the type of investments that multiply small amounts of money five- to 10-times in size.

Harje has an academic background in investments and valuation. He’s had experience across a range of asset classes, from futures to equities.

For any investment, Harje believes you only need to ask two questions. What is it worth? And how much does it cost? These two questions alone open up a world of opportunities, which Harje shares with Money Morning readers five days a week.

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