Investors interested in stocks from the Mining - Gold sector have probably already heard of 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 favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Harmony Gold has a Zacks Rank of #2 (Buy), while Franco-Nevada 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 HMY is likely seeing its earnings outlook improve to a greater extent. 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.
HMY currently has a forward P/E ratio of 15.81, while FNV has a forward P/E of 42.71. We also note that HMY has a PEG ratio of 0.34. 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. FNV currently has a PEG ratio of 4.43.
Another notable valuation metric for HMY is its P/B ratio of 4.22. 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, FNV has a P/B of 5.43.
Based on these metrics and many more, HMY holds a Value grade of B, while FNV has a Value grade of F.
HMY is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that HMY is likely 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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