Investors interested in Mining - Gold stocks are likely familiar with Harmony Gold (HMY) 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.
The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. 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, Harmony Gold is sporting a Zacks Rank of #1 (Strong Buy), while Franco-Nevada has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that HMY likely has seen a stronger improvement to its earnings outlook than FNV has recently. But this is just one piece of the puzzle for value investors.
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.
HMY currently has a forward P/E ratio of 5.55, while FNV has a forward P/E of 36.13. We also note that HMY has a PEG ratio of 0.10. 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 2.28.
Another notable valuation metric for HMY is its P/B ratio of 3.91. 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 5.25.
Based on these metrics and many more, HMY holds a Value grade of B, while FNV has a Value grade of F.
HMY stands above FNV thanks to its solid earnings outlook, and based on these valuation figures, we also feel that HMY is the superior value option right now.
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Harmony Gold Mining Company Limited (HMY): Free Stock Analysis Report Franco-Nevada Corporation (FNV): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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