Is the Northern Star share price cheap or expensive compared to its peers?

The Northern Star Resources Ltd (ASX: NST) share price has been on a bit of a tear of late. Since 26 September, Northern Star shares have risen a healthy 28% or so. That includes an 11.2% gain for the month of October.

But things are still looking a little bleak if we zoom out a little. Year to date, this ASX 200 gold miner has lost 5.2% of its value. Northern Star shares are also 1.1% lower than where they were this time last year.

Rising interest rates are never good for the gold price, and by extension gold miners. Gold as an asset has no yield. So investors tend to shun the yellow metal when interest rates give other assets higher yields. This could be what has gotten ASX gold miners like Northern Star down in recent months.

But after this recent recovery, it might be a good time to see how Northern Star’s share price valuation compares to its gold mining peers on the ASX.

How does the Northern Star share price compare to its ASX gold mining peers?

So a good metric to use to compare different ASX shares’ valuations is the price-to-earnings (P/E) ratio. This is especially so when comparing companies from one industry (in this case, ASX gold miners).

At the present time, Northern Star Resources shares command a P/E ratio of 23.75.

The first fellow gold miner we can look at by comparison is the largest one on the ASX: Newcrest Mining Ltd (ASX: NCM). Currently, Newcrest has a P/E ratio of 10.72.

So this means that investors are certainly placing a higher premium on Northern Star shares than those of Newcrest right now. Paying 10.72x earnings is quite different to paying 23.75x.

The difference isn’t quite so stark with some of the ASX’s other gold miners though. Take Gold Road Resources Ltd (ASX: GOR). Its P/E ratio right now is 21.6, just a few points under Northern Star shares.

Evolution Mining Ltd (ASX: EVN) is another gold miner that is closer to Newcrest than Northern Star when it comes to valuation though. Right now, Evolution Mining has a P/E ratio of 11.81.

The rather confusingly named Silver Lake Resources Limited (ASX: SLR) is another gold share trading cheaper than Northern Star. Its current P/E ratio of 13.02 is again far lower than that of the Northern Star share price.

So we can conclude that Northern Star Resources shares currently trade at a premium valuation compared to its peers in the ASX gold mining space. Clearly, this miner is a favourite amongst ASX gold investors.

The post Is the Northern Star share price cheap or expensive compared to its peers? appeared first on The Motley Fool Australia.

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• Why are ASX 200 gold shares smashing the benchmark returns today?

Motley Fool contributor Sebastian Bowen has positions in Newcrest Mining 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.

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