Investors interested in mining gold stocks are likely to include both Barrick Gold (GOLD – Free Report) and Agnico Eagle Mines (AEM – Free report). But which of these two stocks is more attractive to value investors? To find out, we’ll have to look closer.
Everyone has their own methods for finding valuable opportunities, but our model combines an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The proven Zacks Rank emphasizes earnings estimates and estimate revisions, while our Style Scores identify stocks with specific characteristics.
Barrick Gold currently has a Zacks Rank of #1 (Strong Buy), while Agnico Eagle Mines currently has a Zacks Rank of #3 (Hold). This system places an emphasis on companies that have seen positive earnings estimates, so investors should feel comfortable knowing that GOLD is likely to see its earnings outlook improve to a greater extent. But this is just one factor that value investors are interested in.
Value investors are also interested in some tried-and-true valuation metrics that help show when a company is undervalued at its current share price level.
The Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored price-to-earnings ratio, price-to-earnings ratio, earnings yield, cash flow per share, and a number of other fundamental factors that help us determine a company’s fair value.
GOLD currently has a price-to-earnings ratio of 16.32, while AEM has a price-to-earnings ratio of 22.17. We also note that GOLD has a PEG ratio of 0.50. This popular metric is similar to the widely known price-to-earnings ratio, except that the PEG ratio also takes into account the company’s expected earnings growth. AEM currently has a PEG ratio of 0.79.
Another notable valuation metric for GOLD is its price-to-earnings ratio of 1.12. The P/B ratio is used to compare a stock’s market value to its book value, which is defined as total assets minus total liabilities. For comparison, AEM has a P/B of 2.11.
These metrics, and several others, help GOLD earn a value grade of B, while AEM received a value grade of C.
GOLD has seen stronger estimate revisions and boasts more attractive valuation metrics than AEM, so it appears value investors will conclude that GOLD is the superior option right now.