HMY vs. FNV: Which Stock Is the Better Value Option?

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 stocks is more attractive to value investors? We'll need to take a closer look to find out.

Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.

Both Harmony Gold and Franco-Nevada have a Zacks Rank of # 1 (Strong Buy) right now. 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 just one factor that value investors are interested in.

Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether 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.

HMY currently has a forward P/E ratio of 13.26, while FNV has a forward P/E of 39.37. We also note that HMY has a PEG ratio of 0.24. 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 3.67.

Another notable valuation metric for HMY is its P/B ratio of 3.67. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, FNV has a P/B of 5.40.

Based on these metrics and many more, HMY holds a Value grade of B, while FNV has a Value grade of F.

Both HMY and FNV are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that HMY 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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