Investors interested in Mining – Gold stocks are likely familiar with AngloGold (AU) and Royal Gold (RGLD). But which of these two stocks presents investors with the better value opportunity right now? Let’s take a closer look.
Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Currently, AngloGold has a Zacks Rank of #2 (Buy), while Royal Gold has a Zacks Rank of #3 (Hold). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that AU is likely seeing its earnings outlook improve to a greater extent. But this is only part of the picture for value investors.
Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their current share price levels.
The Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company’s fair value.
AU currently has a forward P/E ratio of 10.36, while RGLD has a forward P/E of 33.10. We also note that AU has a PEG ratio of 0.37. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company’s expected earnings growth rate. RGLD currently has a PEG ratio of 3.31.
Another notable valuation metric for AU is its P/B ratio of 3.21. The P/B is a method of comparing a stock’s market value to its book value, which is defined as total assets minus total liabilities. By comparison, RGLD has a P/B of 3.24.
Based on these metrics and many more, AU holds a Value grade of A, while RGLD has a Value grade of D.
AU has seen stronger estimate revision activity and sports more attractive valuation metrics than RGLD, so it seems like value investors will conclude that AU is the superior option right now.
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