What are you really getting when you buy Northern Star (ASX:NST) shares?

Let’s see how this ASX gold miner stacks up…

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The Northern Star Resources Ltd (ASX: NST) share price has enjoyed a solid day of gains on the ASX boards today. Northern Star shares closed at $8.47 apiece, up a healthy 2.17% for this Tuesday’s trading.

Given this ASX gold miner was one of the most prominent gold shares of 2021, thanks mostly to its blockbuster merger with the old Saracen Mineral Holdings Ltd, it might be a good idea to check out this company and see what’s under the hood.

The ASX gold sector is dominated by just a few large-cap shares. Northern Star is a heavy hitter, with its current market capitalisation of $9.65 billion. But the ‘big dog’ is still Newcrest Mining Ltd (ASX: NCM), with its market cap of $17.62 billion. So let’s see how Northern Star measures up against Newcrest.

How do Northern Star shares compare to Newcrest?

As it currently stands, Northern Star is priced with a price-to-earnings (P/E) ratio of 7.36. That gives this company a trailing dividend yield of 2.26%.

In contrast, Newcrest currently commands a P/E ratio of 10.78 and a trailing market capitalisation yield of 3.47%.

Northern Star currently has 9 Australian gold projects in operation, as well as one in Alaska. The company sold 1,595 million ounces of gold across FY21, achieved with an annualised all-in sustaining cost of $1,583 per ounce.

Contrast that to Newcrest. Newcrest has a slightly more diversified portfolio of mining projects. Its flagship mine is Cadia, in New South Wales. But it also owns another mine in Western Australia, as well as Lihir in Papua New Guinea and Red Chris in Canada. Newcrest recorded production of 2.1 million ounces of gold in FY21, achieved with an all-in sustaining cost of approximately $1,289 per ounce.

So that’s how Northern Star compares to its fellow large-cap ASX gold miner Newcrest. It seems investors have decided to price Newcrest shares at a slightly higher P/E multiple to that of Northern Star. This is perhaps due to Newcrest’s lower-cost operations and higher gold output.

So if you own Northern Star shares, this is what you’re getting with your investment.

The Northern Star share price has been struggling recently. It remains down a nasty 35% over the past year. However, investors have enjoyed a pleasing 112% gain over the past 5 years.

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

Before you consider Northern Star Resources, 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.

*Returns as of January 13th 2022

Motley Fool contributor Sebastian Bowen owns 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 Bruce Jackson.

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