Royal Gold, Inc. (RGLD - Free Report) seems to be an attractive pick now on the recent rally in gold prices and investment in mines that are significant revenue generators. Further, earnings strength and strong balance sheet position are tailwinds.
These factors have secured analysts’ confidence, as reflected by 12% and 10% upward revision in the Zacks Consensus Estimate for current and next-year earnings, respectively, over the past 30 days. The company currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Also, shares of Royal Gold have gained 87.0% in the past year compared with the industry’s growth of 86.1%.
Factors That Make Royal Gold an Attractive Pick
Earnings Growth: The company recorded an earnings growth rate of 12.9% over the last five years, outperforming the industry’s 3.1%. This momentum is likely to continue, as reflected by Royal Gold’s projected earnings per share growth of 74.48% for fiscal 2020.
The company has an estimated long-term earnings growth rate of 10%.
Strong Organic Growth: Royal Gold’s revenues witnessed a 12% compounded annual growth rate over the last five years ended fiscal 2019. The company’s projected sales growth rate of 20.6% for fiscal 2020 indicates continued upward momentum in revenues.
Notably, Royal Gold’s investments in the Mount Milligan, Andacollo, Pueblo Viejo, Wassa, Rainy River, Peñasquito and Cortez properties generated approximately 76% of revenues for fiscal 2019. The company expects these properties and others to continue generating significant revenues in fiscal 2020 and beyond.
Strong Leverage: Royal Gold’s debt/equity ratio is 9.9%, much lower than the industry average of 31.8%. The strong financial health of the company will likely pose it well to capitalize on growth opportunities.
Growth Drivers in Place
Royal Gold settled its long-standing litigation with Vale S.A (VALE - Free Report) on their world-class Voisey's Bay mine in Newfoundland and Labrador. The royalty on the production of nickel, copper, cobalt and other minerals from the Voisey’s Bay mine is directly owned by the Labrador Nickel Royalty Limited Partnership (“LNRLP”), in which the company’s wholly-owned indirect subsidiary is the general partner and 90% owner. Vale will invest $1.7 billion to develop the underground resources, which will extend the mine life from 2023 to 2034.
The resolution of the dispute gives Royal Gold the exposure to a world-class operating asset that ensures a steady stream of royalty revenues. The company expects that Voisey's Bay will once again be among its top 10 revenue generators.
Royal Gold added the high-quality long-life Khoemacau development project to its stream portfolio in February 2019. The silver mine life-purchase agreement with Khoemacau Copper Mining Limited (“KCM”) highlights the purchase and sale of silver produced from the Khoemacau Copper Project in Botswana. Royal Gold will receive 80% of the silver production from the Khoemacau project. The company expects silver deliveries of 1.5 million ounces per annum at 80% stream rate, with initial deliveries probably starting in the first half of calendar 2021.
Other Stocks to Consider
Some other top-ranked stocks in the same industry are Kirkland Lake Gold Ltd. (KL - Free Report) and Agnico Eagle Mines Limited (AEM - Free Report) . While Kirkland Lake Gold is a Zacks Ranked #1 stock, Agnico Eagle Mines carries a Zacks Rank #2 (Buy) at present.
Kirkland Lake Gold has an expected earnings growth rate of 69.85% for the current fiscal year. The Zacks Consensus Estimate for the fiscal year moved up 4% over the last 30 days. The stock has surged 181% in a year.
Agnico Eagle Mines has an estimated earnings growth rate of 157.14% for the current fiscal year. The estimate has moved up 7% over the past 30 days. Shares of this company have surged 97% over the past year.
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