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

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Investors with an interest in Mining - Gold stocks have likely encountered both Gold Fields (GFI - Free Report) and Franco-Nevada (FNV - Free Report) . But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.

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.

Gold Fields has a Zacks Rank of #2 (Buy), while Franco-Nevada 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 GFI 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 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.

GFI currently has a forward P/E ratio of 6.16, while FNV has a forward P/E of 35.27. We also note that GFI has a PEG ratio of 0.16. 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 8.82.

Another notable valuation metric for GFI is its P/B ratio of 1.89. 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, FNV has a P/B of 3.90.

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

GFI stands above FNV thanks to its solid earnings outlook, and based on these valuation figures, we also feel that GFI is the superior value option right now.


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