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Franco-Nevada Corporation Message Board

  • investora2z investora2z Aug 2, 2013 6:40 AM Flag

    Earnings will be the next trigger

    Despite a correction from the highs, the stock has appreciated 28% from the recent lows of $32. This is on back of 10% rise in price of gold. If gold can rise a few percentages more, then we can see further improvement in the short term trend of the gold stocks. The conviction of the bears will reduce if it crosses $1350 decisively. Most stocks have done very well recently, and seem to be taking a breather. It is important that the correction does not run too deep, and crucial supports hold. The strong run up in FNV has stretched the valuations. It is now trading around 65 times trailing earnings and 42 times forward earnings. The price to sales is also high at around 14. However, these streaming companies are preferred as they have lesser risk and higher margins. The positive part is that the company has no debt, and the cash on books is also high ($825 million on March 31). The upcoming earnings next week will be an important trigger for the stock. In the last earnings, the revenues had increased by 3.6% and the net income had fallen by about 25%. It will be interesting to see what the numbers look like this time around. After such a huge rise, it is important that there are no negative surprises as that can lead to a correction. Positive surprises can further strengthen the uptrend. The more important factor obviously is the price of gold, and that needs to remain stable. There are surely more positive voices now than a few weeks ago. Pershing Gold (PGLC), a development stage company, started expansion of its exploration activities recently. The earnings of the gold producers will provide an indication of the financial health. Apart from net margins, the cash position and the leverage will also be the key metrics to watch.

63.52-0.06(-0.09%)Oct 27 4:02 PMEDT