Please ensure Javascript is enabled for purposes of website accessibility

Why Gold Fields Stock Skyrocketed by Over 50% in the First Half of 2019

By Reuben Gregg Brewer - Updated Jul 8, 2019 at 10:39AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

After bumbling along with the price of gold, Gold Fields stock took off in May and June.

What happened

Shares of precious metals miner Gold Fields (GFI -1.28%) rose an incredible 53% in the first six months of 2019, according to data provided by S&P Global Market Intelligence. It wasn't a smooth ride higher, though, with the shares roughly following the price of the metals it produces until early to-mid-May, when it was up about 15% or so. At that point, the stock had what can only be described as a vertical lift-off to end the first half up by more than 50%. Between mid-May and the end of June, the stock was up over 40%.

So what

Precious metals prices will always be a big determinant of financial performance and stock prices for precious metals miners. But for some miners, the price of gold isn't the only factor on which you need to keep a close eye. In Gold Fields' case, its balance sheet has been an ongoing concern. The company started the year with a debt-to-equity ratio of 0.78, the highest level in a decade. Although that in and of itself isn't the end of the world, it has a notable debt maturity coming in 2020, which has been a material overhang on the stock price. 

A scale weighing blocks that spell out risk and reward

Image source: Getty Images

But, in May, the company started to do something about the issue. First, it sold two sets of bonds, $500 million due in five years and another $500 million due in 10. It then used the new debt to start paying down its 2020 debt. Following that, it sold some noncore assets with the intent to use the proceeds to further reduce its debt load. Wall Street clearly believes that the debt overhang is handled, pushing the shares markedly higher as these events unfolded through May and June.   

Now what

While Gold Fields may be on stronger financial footing at this point, most investors would probably be better off looking at other ways to invest in precious metals. There are too many options available to bother with the balance sheet issues at Gold Fields, even if its debt problems appear to be on the mend. 

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Gold Fields Limited Stock Quote
Gold Fields Limited
GFI
$11.61 (-1.28%) $0.15

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
322%
 
S&P 500 Returns
116%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/26/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.