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Royal Gold (RGLD - Free Report) is a $6 billion manager of precious metals streams and royalty interests, with a primary focus on gold.
I have written on the company many times over the past 5 years as a Bear of the Day candidate, as persistent erosion in the price of gold leads to downward earnings estimate revisions for the stock.
Over longer periods, like the past 20 years, the stock has done exceedingly well versus its yellow metal.
Since the start of the 21st century, real gold is only up +466% while Royal Gold is up a whopping +3,071.5%.
But over the last 2-3 years, the story is more mixed as the barbarous relic loses its luster.
Since the start of this decade, the commodity is up +8.7% while the digger is down -21%.
Aside from the great miner rally of Q1 this year, it's been a losing proposition to hold anything gilded.
But I will say this for Royal: while in this decade it's about tied with the basket of diggers, the VanEck Gold Miners ETF (GDX - Free Report) , in just this year the basket is down -26% while Royal is only down -10%.
So I can't pick on the stock too much.
I just generally don't like owning gold or its diggers because its costs are too heavy for the value delivered.
In other words, I believe it's a dying asset class versus advanced technologies, like Biotech and AI, and their hyper-productivity.
As inflation and the US dollar roar higher, it's clearly not the inflation hedge everyone is sold to believe.
Here you can learn more about my thesis about why you should sell all your gold in the next 5-10 years...
Royal Gold manages its business under two segments:
1. Acquisition and Management of Stream Interests — A metal stream is a purchase agreement that provides, in exchange for an upfront deposit payment, the right to purchase all or a portion of one or more metals produced from a mine, at a price determined for the life of the transaction by the purchase agreement.
As of Jun 30 2022, Royal Gold owned interests on 185 properties on five continents, including interests on 41 producing mines and 19 development stage projects.
2. Acquisition and Management of Royalty Interests — Royalties are non-operating interests in mining projects which provide the right to revenues or metals produced from the project after deducting specified costs, if any.
Based in Denver, CO, the company’s financial results are primarily tied to the price of gold, silver, copper, and other metals. Gold contributed 71% to its revenues in first-quarter 2022.
Finally, a word about valuation which could be another problem for RGLD. With projected revenues next year of over $650 million, the stock trades at 9X its current market cap of $6 billion.
This is where a lot of technology stocks trade, not other miners like Barrick (GOLD - Free Report) whose price/sales ratio is just over 2X.
I'm not sure why RGLD commands that valuation, but it's something to aware of.
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Bear of the Day: Royal Gold (RGLD)
Royal Gold (RGLD - Free Report) is a $6 billion manager of precious metals streams and royalty interests, with a primary focus on gold.
I have written on the company many times over the past 5 years as a Bear of the Day candidate, as persistent erosion in the price of gold leads to downward earnings estimate revisions for the stock.
Over longer periods, like the past 20 years, the stock has done exceedingly well versus its yellow metal.
Since the start of the 21st century, real gold is only up +466% while Royal Gold is up a whopping +3,071.5%.
But over the last 2-3 years, the story is more mixed as the barbarous relic loses its luster.
Since the start of this decade, the commodity is up +8.7% while the digger is down -21%.
Aside from the great miner rally of Q1 this year, it's been a losing proposition to hold anything gilded.
But I will say this for Royal: while in this decade it's about tied with the basket of diggers, the VanEck Gold Miners ETF (GDX - Free Report) , in just this year the basket is down -26% while Royal is only down -10%.
So I can't pick on the stock too much.
I just generally don't like owning gold or its diggers because its costs are too heavy for the value delivered.
In other words, I believe it's a dying asset class versus advanced technologies, like Biotech and AI, and their hyper-productivity.
As inflation and the US dollar roar higher, it's clearly not the inflation hedge everyone is sold to believe.
Here you can learn more about my thesis about why you should sell all your gold in the next 5-10 years...
Why Gold is Headed to Zero -- And What You Should Buy Instead
More About Royal Gold and Its Rich Valuation
Royal Gold manages its business under two segments:
1. Acquisition and Management of Stream Interests — A metal stream is a purchase agreement that provides, in exchange for an upfront deposit payment, the right to purchase all or a portion of one or more metals produced from a mine, at a price determined for the life of the transaction by the purchase agreement.
As of Jun 30 2022, Royal Gold owned interests on 185 properties on five continents, including interests on 41 producing mines and 19 development stage projects.
2. Acquisition and Management of Royalty Interests — Royalties are non-operating interests in mining projects which provide the right to revenues or metals produced from the project after deducting specified costs, if any.
Based in Denver, CO, the company’s financial results are primarily tied to the price of gold, silver, copper, and other metals. Gold contributed 71% to its revenues in first-quarter 2022.
Finally, a word about valuation which could be another problem for RGLD. With projected revenues next year of over $650 million, the stock trades at 9X its current market cap of $6 billion.
This is where a lot of technology stocks trade, not other miners like Barrick (GOLD - Free Report) whose price/sales ratio is just over 2X.
I'm not sure why RGLD commands that valuation, but it's something to aware of.