Investors interested in Mining – Gold stocks are likely familiar with Harmony Gold (HMY) and Kirkland Lake Gold (KL). But which of these two stocks presents investors with the better value opportunity right now? Let’s take a closer look.
We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Right now, Harmony Gold is sporting a Zacks Rank of #2 (Buy), while Kirkland Lake Gold has a Zacks Rank of #3 (Hold). This means that HMY’s earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one piece of the puzzle for value investors.
Value investors analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their current share price levels.
Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.
HMY currently has a forward P/E ratio of 7.65, while KL has a forward P/E of 16.13. We also note that HMY has a PEG ratio of 0.22. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock’s expected earnings growth rate. KL currently has a PEG ratio of 5.38.
Another notable valuation metric for HMY is its P/B ratio of 2.23. Investors use the P/B ratio to look at a stock’s market value versus its book value, which is defined as total assets minus total liabilities. By comparison, KL has a P/B of 3.15.
These are just a few of the metrics contributing to HMY’s Value grade of A and KL’s Value grade of C.
HMY has seen stronger estimate revision activity and sports more attractive valuation metrics than KL, so it seems like value investors will conclude that HMY is the superior option right now.
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