CGAU vs. AEM: Which Stock Should Value Investors Buy Now?

Investors interested in stocks from the Mining - Gold sector have probably already heard of Centerra Gold Inc. (CGAU) and Agnico Eagle Mines (AEM). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.

There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.

Centerra Gold Inc. and Agnico Eagle Mines are sporting Zacks Ranks of #1 (Strong Buy) and #3 (Hold), respectively, right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that CGAU is likely seeing its earnings outlook improve to a greater extent. However, value investors will care about much more than just this.

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.

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.

CGAU currently has a forward P/E ratio of 11.69, while AEM has a forward P/E of 17.68. We also note that CGAU has a PEG ratio of 0.44. 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. AEM currently has a PEG ratio of 0.52.

Another notable valuation metric for CGAU is its P/B ratio of 1.97. 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, AEM has a P/B of 4.54.

These metrics, and several others, help CGAU earn a Value grade of B, while AEM has been given a Value grade of C.

CGAU stands above AEM thanks to its solid earnings outlook, and based on these valuation figures, we also feel that CGAU is the superior value option right now.

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This article originally published on Zacks Investment Research (zacks.com).

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