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SBGL vs. FNV: Which Stock Is the Better Value Option?

Zacks Equity Research
·2 min read

Investors looking for stocks in the Mining - Gold sector might want to consider either Sibanye Gold Limited (SBGL) or Franco-Nevada (FNV). But which of these two companies is the best option for those looking for undervalued stocks? 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.

Sibanye Gold Limited has a Zacks Rank of #1 (Strong Buy), while Franco-Nevada has a Zacks Rank of #2 (Buy) right now. Investors should feel comfortable knowing that SBGL likely has seen a stronger improvement to its earnings outlook than FNV has recently. 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.

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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.

SBGL currently has a forward P/E ratio of 3.86, while FNV has a forward P/E of 53.02. We also note that SBGL has a PEG ratio of 0.19. 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. FNV currently has a PEG ratio of 13.26.

Another notable valuation metric for SBGL is its P/B ratio of 3.18. 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, FNV has a P/B of 4.50.

Based on these metrics and many more, SBGL holds a Value grade of B, while FNV has a 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.


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Zacks Investment Research