Why did the Northern Star share price lose its shine in FY22?

The Northern Star Resources Ltd (ASX: NST) share price failed to generate positive returns for shareholders in FY22.

The price of gold recorded severe volatility throughout the financial year which heavily weighed on the ASX gold miner’s shares.

At 30 June 2021, the Northern Star share price closed at $9.78. The same time this year saw the share price close at $6.84, representing a fall of around 30% over the 12 months.

In comparison, the share price of fellow miner Newcrest Mining Ltd (ASX: NCM) lost 17% across the same time frame.

Let’s take a look at what dragged down Northern Star shares in FY22.

What happened to Northern Star during FY22?

There are a couple of likely reasons why the Northern Star share price fell into a hole during FY22.

After trading sideways from July 2021 to January 2022, the Russian war in Ukraine in the following month sparked a commodity boom.

Gold prices accelerated above the psychological US$2,000 barrier and drove Northern Star shares to a 52-week high of $11.59 in mid-April.

However, strong inflationary movements and lower than forecasted GDP readings appear to have soured investor appetite shortly after.

The price of the yellow metal soon went on to trade below US$1,750 an ounce – a level not seen since September 2021.

Higher interest rates tend to drag down the price of precious metals, and investors traditionally switch their focus to government bonds.

With major central banks around the world increasing interest rates, this has put selling pressure on Northern Star shares.

Last week, the gold miner’s shares touched a multi-year low of $6.78 before recovering some lost ground.

Its shares are at $6.93 as of Thursday’s market close.

The company also disappointed market expectations with its March quarterly update.

Management blamed the result on tough trading conditions against an overall challenging operating backdrop.

Nonetheless, several brokers remain bullish on Northern Star shares given its strong fundamentals and current valuation.

Northern Star share price snapshot

A gloomy economic outlook due to soaring inflation levels and interest rate hikes has led the Northern Star share price to tumble 26% in 2022.

The S&P/ASX 200 Resources Index (ASX: XJR) has also headed south but has posted a smaller loss of around 4% year to date.

The sector represents 48 of the largest S&P/ASX 200 Index (ASX: XJO) companies in the energy, metals and mining industry.

Northern Star has a price-to-earnings (P/E) ratio of 6.31 and commands a market capitalisation of roughly $8.04 billion.

The post Why did the Northern Star share price lose its shine in FY22? appeared first on The Motley Fool Australia.

(function() {
function setButtonColorDefaults(param, property, defaultValue) {
if( !param || !param.includes(‘#’)) {
var button = document.getElementsByClassName(“pitch-snippet”)[0].getElementsByClassName(“pitch-button”)[0];
button.style[property] = defaultValue;
}
}

setButtonColorDefaults(“#43B02A”, ‘background’, ‘#5FA85D’);
setButtonColorDefaults(“#43B02A”, ‘border-color’, ‘#43A24A’);
setButtonColorDefaults(“#fff”, ‘color’, ‘#fff’);
})()

More reading

• 5 things to watch on the ASX 200 on Friday
• What’s the outlook for ASX 200 dividend shares in FY23?
• Could rising rates hurt ASX 200 bank shares in the longer run?
• It’s been a crazy year for Core Lithium shares so far. What’s next?
• Here are the top 10 ASX shares today

Motley Fool contributor Aaron Teboneras has positions in Northern Star Resources Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

from The Motley Fool Australia https://ift.tt/DWyb3VI