Investors looking for stocks in the Mining – Gold sector might want to consider either Gold Fields (GFI) or 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 Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.
Gold Fields has a Zacks Rank of #2 (Buy), while Royal Gold has a Zacks Rank of #3 (Hold) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that GFI is likely seeing its earnings outlook improve to a greater extent. But this is just one factor that value investors are interested in.
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.
Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.
GFI currently has a forward P/E ratio of 7.67, while RGLD has a forward P/E of 32.14. We also note that GFI has a PEG ratio of 0.23. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company’s expected earnings growth rate. RGLD currently has a PEG ratio of 3.21.
Another notable valuation metric for GFI is its P/B ratio of 2.88. The P/B ratio pits a stock’s market value against its book value, which is defined as total assets minus total liabilities. For comparison, RGLD has a P/B of 3.01.
These metrics, and several others, help GFI earn a Value grade of A, while RGLD has been given a Value grade of D.
GFI is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that GFI is likely the superior value option right now.
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