Investors interested in Mining – Gold stocks are likely familiar with New Gold (NGD) and Royal Gold (RGLD). But which of these two stocks is more attractive to value investors? We’ll need to take a closer look to find out.
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 puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
New Gold 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 NGD 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 try to analyze a wide range of traditional figures and metrics to help determine whether a company is undervalued at its current share price levels.
The Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.
NGD currently has a forward P/E ratio of 8.35, while RGLD has a forward P/E of 29.76. We also note that NGD has a PEG ratio of 1.67. 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. RGLD currently has a PEG ratio of 2.98.
Another notable valuation metric for NGD is its P/B ratio of 1.52. 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 2.91.
These are just a few of the metrics contributing to NGD’s Value grade of A and RGLD’s Value grade of D.
NGD sticks out from RGLD 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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