Contrasting Royal Gold (RGLD) & Newmont Mining (NEM)

Royal Gold (NASDAQ: RGLD) and Newmont Mining (NYSE:NEM) are both mid-cap basic materials companies, but which is the superior investment? We will contrast the two companies based on the strength of their valuation, analyst recommendations, risk, profitability, earnings, institutional ownership and dividends.

Volatility and Risk

Royal Gold has a beta of 0.46, indicating that its stock price is 54% less volatile than the S&P 500. Comparatively, Newmont Mining has a beta of 0.1, indicating that its stock price is 90% less volatile than the S&P 500.

Profitability

This table compares Royal Gold and Newmont Mining’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Royal Gold 23.06% 4.12% 3.07%
Newmont Mining 1.18% 6.20% 3.55%

Valuation & Earnings

This table compares Royal Gold and Newmont Mining’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Royal Gold $440.81 million 11.72 $101.53 million $1.54 51.27
Newmont Mining $6.71 billion 2.99 -$627.00 million $0.15 250.67

Royal Gold has higher earnings, but lower revenue 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.

Analyst Recommendations

This is a summary of current ratings and price targets for Royal Gold and Newmont Mining, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Royal Gold 0 8 4 0 2.33
Newmont Mining 1 5 8 0 2.50

Royal Gold currently has a consensus price target of $94.69, indicating a potential upside of 19.92%. Newmont Mining has a consensus price target of $42.75, indicating a potential upside of 13.70%. Given Royal Gold’s higher probable upside, research analysts clearly believe Royal Gold is more favorable than Newmont Mining.

Institutional and Insider Ownership

72.0% of Royal Gold shares are owned by institutional investors. Comparatively, 81.9% of Newmont Mining shares are owned by institutional investors. 1.1% of Royal Gold shares are owned by company insiders. Comparatively, 0.3% of Newmont Mining shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company is poised for long-term growth.

Dividends

Royal Gold pays an annual dividend of $0.96 per share and has a dividend yield of 1.2%. Newmont Mining pays an annual dividend of $0.30 per share and has a dividend yield of 0.8%. Royal Gold pays out 62.3% of its earnings in the form of a dividend. Newmont Mining pays out 200.0% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Newmont Mining has raised its dividend for 12 consecutive years. Royal Gold is clearly the better dividend stock, given its higher yield and lower payout ratio.

Summary

Royal Gold beats Newmont Mining on 9 of the 17 factors compared between the two stocks.

Royal Gold Company Profile

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.

Newmont Mining Company Profile

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).

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