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Tuesday’s Top Upgrades (and Downgrades): Yamana Gold Inc. (USA) (AUY), eBay Inc (EBAY)

Gold rush!
One thing I’ll say in eBay’s defense, though: It’s not as horrible an investment idea as the one analyst Cowen & Co. floated this morning.

Recommending investors pick up their shovels and head over to load up on Yamana Gold Inc. (USA) (NYSE:AUY) shares, Cowen praised Yamana for being one of the few gold miners to have not cut 2013 guidance this year. The analyst sees Yamana Gold Inc. (USA) (NYSE:AUY) shares are being worth $16.40 within a year and recommends buying them now.

But here’s the thing: Priced at 26 times earnings, but growing at barely 9%, Yamana is fully as pricey as eBay yet is growing more slowly. Adding to the stock’s riskiness is that Yamana Gold Inc. (USA) (NYSE:AUY) recently broke a three-year streak of positive free cash flow production. In 2012, the company not only failed to generate sufficient free cash flow to back up its reported GAAP profit (a notable defect in the company, even back when it was generating cash). Yamana actually began burning through what cash it has, resulting in a “free” cash flow number of negative $380 million.

I prefer to invest in companies that generate cash, rather than burn it. Unfortunately, Yamana Gold Inc. (USA) (NYSE:AUY) is not that kind of stock.

The article Tuesday’s Top Upgrades (and Downgrades) originally appeared on Fool.com and is written by Rich Smith.

Fool contributor Rich Smith has no position in any stocks mentioned. The Motley Fool recommends Cracker Barrel Old Country Store and eBay and owns shares of eBay.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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