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

Zacks Equity Research

Investors with an interest in Mining - Gold stocks have likely encountered both Harmony Gold (HMY) and Royal Gold (RGLD). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.

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 emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.

Harmony Gold has a Zacks Rank of #1 (Strong Buy), while Royal Gold has a Zacks Rank of #2 (Buy) right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that HMY has an improving earnings outlook. However, value investors will care about much more than just this.

Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their 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 7.31, while RGLD has a forward P/E of 43.04. We also note that HMY has a PEG ratio of 0.26. 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 4.30.

Another notable valuation metric for HMY is its P/B ratio of 0.95. 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 3.06.

These metrics, and several others, help HMY earn a Value grade of A, while RGLD has been given a Value grade of D.

HMY is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that HMY is likely the superior value option right now.


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Harmony Gold Mining Company Limited (HMY) : Free Stock Analysis Report
 
Royal Gold, Inc. (RGLD) : Free Stock Analysis Report
 
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