Equinox Gold Reports Record Output but Valuation and Risks Remain Elevated

What happened

Equinox Gold announced record Q4 and full-year 2025 gold production of 922,827 ounces, with 2026 guidance projecting an 80% increase in annual Canadian production from assets like Greenstone and Valentine. This operational success is driven by the Greenstone ramp-up, aligning with DeepValue's note of strong revenue growth to $2.3 billion TTM. However, the stock has already surged 151% over 12 months, trading at rich multiples such as a P/E of 149x and EV/EBITDA of 12.9x. Despite the growth, net income remains modest at $62 million TTM, interest coverage is low at 2.2x, and free cash flow has been volatile. Additionally, persistent ESG and community risks at mines like Aurizona and Los Filos continue to threaten operational stability and financial performance.

Implication

The record production confirms Equinox Gold's execution on growth but does not alleviate its high valuation, which embeds optimistic assumptions about future performance. Rich multiples leave little margin for error, especially given modest net income and low interest coverage that could stress the balance sheet in a downturn. Ongoing ESG incidents and community disputes at key operations pose material risks to production and costs, potentially undermining cash flow. Volatile free cash flow history suggests limited durability, making the current price unattractive from a value perspective. Therefore, monitoring for sustained cash flow improvement and risk mitigation is advised before considering new investments.

Thesis delta

The news reinforces operational momentum but does not shift the DeepValue 'WAIT' thesis. It fails to address core concerns about overvaluation, weak financial metrics, or unresolved ESG risks. A thesis upgrade would require clear evidence of durable free cash flow generation and reduced operational vulnerabilities, which are not yet apparent.