Investors with an interest in Mining - Gold stocks have likely encountered both Gold Fields (GFI) and Franco-Nevada (FNV). 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.
Currently, both Gold Fields and Franco-Nevada are holding a Zacks Rank of # 2 (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. 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.
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.
GFI currently has a forward P/E ratio of 14.47, while FNV has a forward P/E of 41.38. We also note that GFI has a PEG ratio of 1.71. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. FNV currently has a PEG ratio of 10.34.
Another notable valuation metric for GFI is its P/B ratio of 3.11. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, FNV has a P/B of 4.28.
These are just a few of the metrics contributing to GFI's Value grade of B and FNV's Value grade of F.
Both GFI and FNV are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that GFI is the superior value option right now.
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