Investors looking for stocks in the Mining - Gold sector might want to consider either Kinross Gold (KGC) or 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.
We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Right now, both Kinross Gold and Franco-Nevada are sporting a Zacks Rank of #1 (Strong Buy). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that these stocks have improving earnings outlooks. But this is only part of the picture 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 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.
KGC currently has a forward P/E ratio of 14.33, while FNV has a forward P/E of 35.52. We also note that KGC has a PEG ratio of 0.41. 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 1.64.
Another notable valuation metric for KGC is its P/B ratio of 3.56. 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 5.39.
These are just a few of the metrics contributing to KGC's Value grade of B and FNV's Value grade of F.
Both KGC and FNV are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that KGC is the superior value option right now.
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Kinross Gold Corporation (KGC): 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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