Investors with an interest in Mining – Gold stocks have likely encountered both New Gold (NGD) and Franco-Nevada (FNV). But which of these two stocks offers value investors a better bang for their buck right now? We’ll need to 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 favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
New Gold and Franco-Nevada are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. This means that NGD’s earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one factor that value investors are interested in.
Value investors are also interested in a number of tried-and-true valuation metrics that help show when a company is undervalued at its 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.
NGD currently has a forward P/E ratio of 7.63, while FNV has a forward P/E of 41.16. We also note that NGD has a PEG ratio of 1.53. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company’s expected EPS growth rate. FNV currently has a PEG ratio of 10.29.
Another notable valuation metric for NGD is its P/B ratio of 1.49. 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, FNV has a P/B of 4.47.
These metrics, and several others, help NGD earn a Value grade of A, while FNV has been given a Value grade of D.
NGD sticks out from FNV in both our Zacks Rank and Style Scores models, so value investors will likely feel that NGD is the better option right now.
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