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

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

Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.

Yamana Gold has a Zacks Rank of #2 (Buy), while Royal Gold has a Zacks Rank of #3 (Hold) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that AUY is likely seeing 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 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.

AUY currently has a forward P/E ratio of 22.95, while RGLD has a forward P/E of 31.89. We also note that AUY has a PEG ratio of 1.26. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. RGLD currently has a PEG ratio of 3.19.

Another notable valuation metric for AUY is its P/B ratio of 1.20. 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, RGLD has a P/B of 3.30.

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

AUY 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 AUY is likely the superior value option right now.


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