Goldman Sachs tips 27% upside for the Northern Star (ASX:NST) share price

Northern Star’s shares could be like gold dust for investors…

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A woman in a business suit sits at her desk with gold bars in each hand while she kisses one bar with her eyes closed. Her desk has another three gold bars stacked in front of her. symbolising the rising Northern Star share price

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Key points

  • Northern Star shares are rising on Friday despite the market selloff
  • Goldman Sachs has reiterated its buy rating following the gold miner’s second quarter update
  • It believes its shares can rise 27% from here

There are only a handful of shares that are pushing higher on the ASX 200 on Friday. One of those is the Northern Star Resources Ltd (ASX: NST) share price.

In late afternoon trade, the gold miner’s shares are up 0.5% to $9.79.

Why is the Northern Star share price avoiding the selloff?

The Northern Star share price has avoided the market and gold sector selloff today after brokers responded positively to its second quarter update.

One of those brokers was Goldman Sachs. This morning the broker retained its buy rating and lifted its price target on the company’s shares to $12.40.

Based on the current Northern Star share price, this implies potential upside of almost 27% over the next 12 months.

What did the broker say?

Goldman notes that Northern Star’s second quarter update was slightly below its estimates. However, it was pleased to see its guidance maintained for the full year.

In light of this, it continues to believe the Northern Star share price is very attractively priced at 0.78x net asset value (NAV). This compares to 1.3x NAV for its North American peers.

But the main reason for its positivity is the company’s growth outlook. It notes that this is being underpinned by high-returning organic growth across all production hubs.

Goldman explained: “Strong medium-term growth profile from the diverse portfolio of assets drives down unit costs, improves margins, and lifts FCF (+25% production growth from FY21 to FY26E, +20% 5-year EPS CAGR). Every asset in the portfolio has potential to grow production and extend mine life.”

A final reason Goldman is positive on the Northern Star share price is its balance sheet.

It commented: “Strong balance sheet and FCF despite investment in growth; forecast net cash of A$463mn (ex-leases) by Jun-22, 5.8%/8.1%/9.4% FCF yield (FY22/23/24E).”

The broker expects this to underpin solid dividend growth in the coming years. Goldman forecasts a 2.1% yield in FY 2022 and then ultimately a 3.3% yield by FY 2025.

Should you invest $1,000 in Northern Star right now?

Before you consider Northern Star, you'll want to hear this.

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The online investing service he’s run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. 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 Bruce Jackson.

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