Investors interested in stocks from the Mining - Gold sector have probably already heard of Eldorado Gold Corporation (EGO) and Royal Gold (RGLD). But which of these two stocks presents investors with the better value opportunity right now? 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, Eldorado Gold Corporation is sporting a Zacks Rank of #2 (Buy), while Royal Gold has a Zacks Rank of #3 (Hold). This means that EGO's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is only part of the picture for value investors.
Value investors analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their 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.
EGO currently has a forward P/E ratio of 12.89, while RGLD has a forward P/E of 26.33. We also note that EGO has a PEG ratio of 0.38. 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. RGLD currently has a PEG ratio of 1.38.
Another notable valuation metric for EGO is its P/B ratio of 0.98. 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, RGLD has a P/B of 3.76.
Based on these metrics and many more, EGO holds a Value grade of A, while RGLD has a Value grade of D.
EGO sticks out from RGLD in both our Zacks Rank and Style Scores models, so value investors will likely feel that EGO is the better option right now.
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Eldorado Gold Corporation (EGO): Free Stock Analysis Report Royal Gold, Inc. (RGLD): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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