Investors interested in Mining - Gold stocks are likely familiar with Newmont Corporation (NEM) and Royal Gold (RGLD). But which of these two companies is the best option for those looking for undervalued stocks? 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.
Right now, both Newmont Corporation and Royal Gold are sporting a Zacks Rank of #1 (Strong Buy). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that both of these companies have improving earnings outlooks. However, value investors will care about much more than just this.
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.
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.
NEM currently has a forward P/E ratio of 14.69, while RGLD has a forward P/E of 24.90. We also note that NEM has a PEG ratio of 0.62. 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 0.76.
Another notable valuation metric for NEM is its P/B ratio of 2.91. 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 4.9.
Based on these metrics and many more, NEM holds a Value grade of B, while RGLD has a Value grade of D.
Both NEM and RGLD are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that NEM is the superior value option right now.
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This article originally published on Zacks Investment Research (zacks.com).
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
