(GFI) - Gold Fields, Ltd. - Next year's earnings estimates have dramatically increased over the past two months

Gold Fields, Ltd. is benefiting from soaring gold prices. Next year's earnings estimates have dramatically increased over the past two months. Over that time period, estimates have risen 33.3% to $1.28 per share. The stock is quite cheap given the company's growth prospects and growth rate. Currently, GFI is trading at 16x next year's earnings estimate, well below the company's long-term growth rate of 30.5%, giving the stock a PEG ratio of 0.52. Gold Fields, Ltd. (GFI) is one of the leading precious metals producers in South Africa, with an annual gold production of approximately 4.2 million ounces. The company owns about 62.8 million ounces of mineral reserves. Gold Fields has gold and platinum group metals (PGM) exploration projects in Africa, Australia, Europe, and North and South America. In the last few quarters, management implemented various cost initiatives. One such cost saving project-the Project 100, completed during the fiscal 2005-generated savings that were 40% more than the amount targeted. Project Beyond (initiated in 2004) generated cost savings of R30 million in FY05 and R42 million during the first ninemonths of FY06. The Project is expected to generate additional savings of R20 million in the next quarter and thus remains on track to achieve its targeted cost savings in the range of R60-R80 million in 2006. The company's production is expected to increase dramatically over the next 2-3 years when these growth projects commence. Some of the projects underway are the Arctic Platinum Project (APP) in Finland, Cerro Corona in Peru, and two joint ventures (Fujian Zijin Mining Company and Sino Gold, a joint venture between Gold Fields and Shandong) in China. Arctic Platinum has an estimated resource content of about 14 million ounces of gold. High gold prices bode well for future revenue growth. Despite the strengthening of South African rand relative to the U.S. dollar, higher U.S. dollar gold prices resulted in increased rand gold prices, which more than offset the decline in third quarter production leading to a 22% revenue growth. Going forward, gold prices are expected to remain at high levels. Gold Fields cash flow position remains strong. During the quarter, the company generated US$191 million of cash flow, significantly higher than the prior-quarter level of US$90 million, amid higher earnings. Strong cash flows also assist Gold Fields in pursuing strategic acquisitions-the company recently acquired Bolivar Golds' Choco 10 mine in Venezuela. Next year's earnings estimates have dramatically increased over the past two months. Over that time period, estimates have risen 33.3% to $1.28 per share. The stock is quite cheap given the company's growth prospects and growth rate. Currently, GFI is trading at 16x next year's earnings estimate, well below the company's long-term growth rate of 30.5%, giving the stock a PEG ratio of 0.52. Note: The Zacks Rank is a very sensitive indicator that can change frequently for an individual stock. This important indicator is updated daily on Zacks.com and is available to Zacks Premium subscribers. As such, it is prudent to check the site for the latest Zacks Rank on the stocks highlighted in this section. Simply click the link for the stock or enter the symbol in the ticker entry box in the upper left hand corner of the web site. Content Courtesy: Zacks Investment Research #1 Ranked Stocks Highlight Archive To truly take advantage of the Zacks Rank, you need to first understand how it works. That is why we created the free special report: Zacks Rank Guide: Harnessing the Power of Earnings Estimate Revisions. Blog Home