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Is the Newcrest share price a buy in August?

Old fashioned scales weighing two gold bars in front of dark background, gold share price, newcrest mining share price
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Is the Newcrest Mining Limited (ASX: NCM) share price a good buy this month? Shares in the Aussie gold miner are up 23.4% this year as global gold prices continue to climb.

With Newcrest set to report its full-year result next Friday, what can we expect from the Newcrest share price for the rest of the year?

Why the Newcrest share price has rocketed higher

Newcrest is one of the world’s largest gold mining companies. The company is an unhedged gold producer that generates strong operating cash flow.

In fact, Newcrest’s FY19 free cash flow surged 34% higher to $804 million with record gold and copper production numbers.

The company also had its lowest-ever annual all-in sustaining cost (AISC) of $738 per ounce. I think that bodes well for the company’s FY20 result next week.

The Newcrest share price has already climbed higher but I think we could see a surprise earnings performance.

Global gold prices have smashed previous all-time highs and continue to climb past US$2,000 per ounce. With the coronavirus pandemic causing a spike in demand for gold, that means Q4 earnings could be particularly strong.

If Newcrest can keep its AISC low this year with a higher realised price, that could spark a share price rally in August.

Is August the time to buy?

ASX gold shares like Newcrest have had a strong run in 2020. There’s always the risk of a disappointing earnings result ruining that momentum.

However, I’m quietly confident about the Newcrest share price. I think the company’s unhedged nature could also help boost earnings given the rocketing gold prices.

The real question is whether or not the Aussie gold producer is a good value buy. 

The company trades at a price-to-earnings (P/E) ratio of 36.1 which is cheaper than some of its peers. For instance, Saracen Mineral Holdings Limited (ASX: SAR) trades at a P/E of 44.4.

Foolish takeaway

If you want to invest in ASX gold shares, I think the Newcrest share price could be a good option.

Whether you’re keen on buying or not, I think the 14 August earnings result will be one to watch.

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Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. 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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