Investors interested in stocks from the Mining - Gold sector have probably already heard of Harmony Gold (HMY) and Barrick Gold (GOLD). But which of these two stocks offers value investors a better bang for their buck right now? We'll need to 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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Harmony Gold and Barrick Gold 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. 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.
The Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.
HMY currently has a forward P/E ratio of 18.67, while GOLD has a forward P/E of 29.81. We also note that HMY has a PEG ratio of 0.41. 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. GOLD currently has a PEG ratio of 14.91.
Another notable valuation metric for HMY is its P/B ratio of 1.12. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, GOLD has a P/B of 1.50.
Based on these metrics and many more, HMY holds a Value grade of A, while GOLD has a Value grade of C.
HMY stands above GOLD 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
Barrick Gold Corporation (GOLD) : Free Stock Analysis Report
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