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IAG vs. FNV: Which Stock Should Value Investors Buy Now?

Zacks Equity Research
Here at Zacks, our focus is on the proven Zacks Rank system, which emphasizes earnings estimates and estimate revisions to find great stocks. Nevertheless, we are always paying attention to the latest value, growth, and momentum trends to underscore strong picks.

Investors with an interest in Mining - Gold stocks have likely encountered both Iamgold (IAG) 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.

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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.

Currently, Iamgold has a Zacks Rank of #2 (Buy), while Franco-Nevada has a Zacks Rank of #3 (Hold). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that IAG has an improving earnings outlook. But this is only part of the picture 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.

IAG currently has a forward P/E ratio of 29.51, while FNV has a forward P/E of 54.07. We also note that IAG has a PEG ratio of 9.84. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. FNV currently has a PEG ratio of 13.52.

Another notable valuation metric for IAG is its P/B ratio of 0.49. 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 2.71.

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

IAG sticks out from FNV in both our Zacks Rank and Style Scores models, so value investors will likely feel that IAG is the better option right now.


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