Investors with an interest in Mining – Gold stocks have likely encountered both 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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Harmony Gold and Franco-Nevada are sporting Zacks Ranks of #1 (Strong Buy) and #2 (Buy), respectively, right now. This means that HMY's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one piece of the puzzle 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.
Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.
HMY currently has a forward P/E ratio of 8.16, while FNV has a forward P/E of 40.54. We also note that HMY has a PEG ratio of 0.50. 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 22.03.
Another notable valuation metric for HMY is its P/B ratio of 3.05. 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 4.34.
These metrics, and several others, help HMY earn a Value grade of A, while FNV has been given a Value grade of F.
HMY stands above FNV thanks to its solid earnings outlook, and based on these valuation figures, we also feel that HMY is 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 Report
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