Investors interested in stocks from the Mining – Miscellaneous sector have probably already heard of Nexa Resources S.A. (NEXA) and Wheaton Precious Metals Corp. (WPM). But which of these two stocks presents investors with the better value opportunity right now? 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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Nexa Resources S.A. has a Zacks Rank of #1 (Strong Buy), while Wheaton Precious Metals Corp. 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 NEXA 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 analyze a variety of traditional, tried-and-true metrics to help find companies 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.
NEXA currently has a forward P/E ratio of 3.07, while WPM has a forward P/E of 28.31. We also note that NEXA has a PEG ratio of 0.57. 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. WPM currently has a PEG ratio of 5.66.
Another notable valuation metric for NEXA is its P/B ratio of 0.65. 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, WPM has a P/B of 2.94.
Based on these metrics and many more, NEXA holds a Value grade of A, while WPM has a Value grade of D.
NEXA has seen stronger estimate revision activity and sports more attractive valuation metrics than WPM, so it seems like value investors will conclude that NEXA is the superior option right now.
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