Investors with an interest in Mining – Gold stocks have likely encountered both New Gold (NGD) and Barrick Gold (GOLD). 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.
New Gold and Barrick Gold are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that NGD 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.
NGD currently has a forward P/E ratio of 19.60, while GOLD has a forward P/E of 21.51. We also note that NGD has a PEG ratio of 3.92. 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. GOLD currently has a PEG ratio of 10.76.
Another notable valuation metric for NGD 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, GOLD has a P/B of 0.94.
These are just a few of the metrics contributing to NGD’s Value grade of A and GOLD’s Value grade of C.
NGD stands above GOLD thanks to its solid earnings outlook, and based on these valuation figures, we also feel that NGD is the superior value option right now.
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