Investors looking for stocks in the Mining - Gold sector might want to consider either Sibanye Gold Limited or 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.
The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. The Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.
Sibanye Gold Limited and Royal Gold are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. This means that SBGL's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one factor that value investors are interested in.
Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether 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.
SBGL currently has a forward P/E ratio of 25.78, while RGLD has a forward P/E of 46.49. We also note that SBGL has a PEG ratio of 0.80. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. RGLD currently has a PEG ratio of 4.65.
Another notable valuation metric for SBGL is its P/B ratio of 1.84. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, RGLD has a P/B of 3.58.
These are just a few of the metrics contributing to SBGL's Value grade of B and RGLD's Value grade of F.
SBGL 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 SBGL is likely the superior value option right now.