Newmont Mining (NEM) & Royal Gold (RGLD) Critical Analysis
Newmont Mining (NYSE: NEM) and Royal Gold (NASDAQ:RGLD) are both mid-cap basic materials companies, but which is the superior business? We will contrast the two businesses based on the strength of their analyst recommendations, earnings, institutional ownership, valuation, dividends, risk and profitability.
Risk and Volatility
Newmont Mining has a beta of 0.1, indicating that its stock price is 90% less volatile than the S&P 500. Comparatively, Royal Gold has a beta of 0.46, indicating that its stock price is 54% less volatile than the S&P 500.
This table compares Newmont Mining and Royal Gold’s net margins, return on equity and return on assets.
|Net Margins||Return on Equity||Return on Assets|
Earnings and Valuation
This table compares Newmont Mining and Royal Gold’s gross revenue, earnings per share and valuation.
|Gross Revenue||Price/Sales Ratio||Net Income||Earnings Per Share||Price/Earnings Ratio|
|Newmont Mining||$6.71 billion||3.05||-$627.00 million||$0.70||54.80|
|Royal Gold||$440.81 million||12.37||$101.53 million||$1.54||54.08|
Royal Gold has lower revenue, but higher earnings than Newmont Mining. Royal Gold is trading at a lower price-to-earnings ratio than Newmont Mining, indicating that it is currently the more affordable of the two stocks.
Insider and Institutional Ownership
81.9% of Newmont Mining shares are owned by institutional investors. Comparatively, 72.0% of Royal Gold shares are owned by institutional investors. 0.3% of Newmont Mining shares are owned by insiders. Comparatively, 1.1% of Royal Gold shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock will outperform the market over the long term.
Newmont Mining pays an annual dividend of $0.30 per share and has a dividend yield of 0.8%. Royal Gold pays an annual dividend of $1.00 per share and has a dividend yield of 1.2%. Newmont Mining pays out 42.9% of its earnings in the form of a dividend. Royal Gold pays out 64.9% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Newmont Mining has increased its dividend for 2 consecutive years and Royal Gold has increased its dividend for 13 consecutive years. Royal Gold is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.
This is a breakdown of current recommendations for Newmont Mining and Royal Gold, as provided by MarketBeat.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
Newmont Mining currently has a consensus price target of $42.82, suggesting a potential upside of 11.62%. Royal Gold has a consensus price target of $96.95, suggesting a potential upside of 16.42%. Given Royal Gold’s higher probable upside, analysts clearly believe Royal Gold is more favorable than Newmont Mining.
Royal Gold beats Newmont Mining on 9 of the 17 factors compared between the two stocks.
About Newmont Mining
Newmont Mining Corporation is a mining company, which is focused on the production of and exploration for gold and copper. The Company is primarily a gold producer with operations and/or assets in the United States, Australia, Peru, Ghana and Suriname. The Company’s segments include North America, South America, Asia Pacific and Africa. The Company’s North America segment consists primarily of Carlin, Phoenix, Twin Creeks and Long Canyon in the state of Nevada, and Cripple Creek &Victor (CC&V) in the state of Colorado, in the United States. The Company’s South America segment consists primarily of Yanacocha in Peru and Merian in Suriname. The Company’s Asia Pacific segment consists primarily of Boddington, Tanami and Kalgoorlie in Australia. The Company’s Africa segment consists primarily of Ahafo and Akyem in Ghana. As of December 31, 2016, it had gold reserves of 68.5 million ounces and an aggregate land position of approximately 23,000 square miles (59,000 square kilometers).
About Royal Gold
Royal Gold, Inc., together with its subsidiaries, is engaged in acquiring and managing precious metal streams, royalties and similar interests. The Company operates through two segments: Acquisition and Management of Stream Interests, and Acquisition and Management of Royalty Interests. Its assets are located in Canada, Chile, Dominican Republic, Mexico, the United States, Africa, Australia and Other. As of June 30, 2016, the Company owned stream interests on four producing properties and three development-stage properties. It has investments in stream interests relating to Pueblo Viejo, Andacollo, Wassa and Prestea, and Rainy River. As of June 30, 2016, the Company owned royalty interests on 34 producing properties, 21 development-stage properties and 131 exploration-stage properties, of which it considered 50 to be evaluation-stage projects.
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