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Investors interested in stocks from the Mining - Gold sector have probably already heard of Alamos Gold (AGI) and Royal Gold (RGLD). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
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 favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Currently, Alamos Gold has a Zacks Rank of #2 (Buy), while Royal Gold has a Zacks Rank of #3 (Hold). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that AGI is likely seeing its earnings outlook improve to a greater extent. However, value investors will care about much more than just this.
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.
Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.
AGI currently has a forward P/E ratio of 26.50, while RGLD has a forward P/E of 38.74. We also note that AGI has a PEG ratio of 0.45. 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. RGLD currently has a PEG ratio of 3.87.
Another notable valuation metric for AGI is its P/B ratio of 0.85. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, RGLD has a P/B of 2.81.
These metrics, and several others, help AGI earn a Value grade of B, while RGLD has been given a Value grade of D.
AGI stands above RGLD thanks to its solid earnings outlook, and based on these valuation figures, we also feel that AGI is the superior value option right now.
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