It has been a superb yr for shareholders in FTSE 250 agency Hochschild Mining (LSE: HOC). The Hochschild Mining share price has soared 106% to this point this yr.

Over 5 years, the achieve has been a extra modest 39%. Nonetheless, I regard that as a stable efficiency. The FTSE 250 is definitely down 4% over that point interval, so Hochschild is properly forward of its friends.

After such a robust efficiency in 2024, is Hochschild a share I believe buyers ought to take into account as we head in the direction of the top of 1 yr and begin of one other?

Beneficial circumstances have helped elevate the share price

The corporate has been helped this yr by the gold price going gangbusters.

That helps clarify why within the first half, attributable manufacturing volumes grew 11% yr on yr however revenues jumped 25% and the corporate recorded pre-exceptional revenue earlier than earnings tax of $69m, whereas within the equal final yr that quantity had been a $66m loss.

To date, so good.

If gold costs stay excessive – and the present degree of worldwide geopolitical danger is one cause to count on that they could do – then I believe Hochschild might hold reaping the profit when it comes to profitability and likewise demand.

I like the truth that the corporate is well-established, has some diversification throughout totally different mines (although is concentrated within the gold and silver area) and is already a confirmed quantity producer versus merely being on the exploration section.

Weighing some dangers

However there are a few issues that concern me concerning the FTSE 250 share.

One is its valuation. The share price greater than doubling to this point in 2024 is clearly excellent news for current shareholders. But it surely signifies that the corporate now trades on a price-to-earnings ratio of 45. That appears excessive to me. Because the soar from final yr’s loss to this yr’s revenue on the interim stage demonstrates, the earnings image for Hochschild may be unstable.

So, if gold costs hold pushing up, earnings would possibly develop additional. However on condition that gold costs have already been at a traditionally excessive degree not too long ago, my worry is that sooner or later the yellow metallic will fall in worth – and with it, Hochschild’s share price. The corporate’s heavy publicity to gold is a double-edged sword.

Threat-to-reward ratio doesn’t appeal to me

So, though I like plenty of issues about Hochschild Mining’s enterprise and its industrial prospects, I don’t personal the FTSE 250 share. Nor do I’ve any plans so as to add it to my portfolio.

As for whether or not buyers ought to take into account the share, I believe there may very well be extra enticing shares elsewhere relating to risk-to-reward ratios.

A hovering gold price has been good for Hochschild’s efficiency to this point in 2024, however the reverse might additionally transform true when the tide activates gold pricing.