Kirkland Lake Gold (NYSE:KL) and Franco Nevada (NYSE:FNV) are both basic materials companies, but which is the superior stock? We will compare the two businesses based on the strength of their analyst recommendations, profitability, institutional ownership, dividends, earnings, valuation and risk.

Analyst Recommendations

This is a breakdown of current recommendations and price targets for Kirkland Lake Gold and Franco Nevada, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Kirkland Lake Gold 0 1 2 0 2.67
Franco Nevada 0 5 4 0 2.44

Franco Nevada has a consensus price target of $95.17, indicating a potential upside of 54.14%. Given Franco Nevada’s higher possible upside, analysts plainly believe Franco Nevada is more favorable than Kirkland Lake Gold.

Institutional and Insider Ownership

42.4% of Kirkland Lake Gold shares are held by institutional investors. Comparatively, 63.5% of Franco Nevada shares are held by institutional investors. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company is poised for long-term growth.

Profitability

This table compares Kirkland Lake Gold and Franco Nevada’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Kirkland Lake Gold 24.94% 18.54% 14.20%
Franco Nevada 32.94% 4.80% 4.72%

Valuation & Earnings

This table compares Kirkland Lake Gold and Franco Nevada’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Kirkland Lake Gold $747.49 million 5.45 $132.42 million $0.71 27.35
Franco Nevada $675.00 million 17.03 $194.70 million $1.08 57.17

Franco Nevada has lower revenue, but higher earnings than Kirkland Lake Gold. Kirkland Lake Gold is trading at a lower price-to-earnings ratio than Franco Nevada, indicating that it is currently the more affordable of the two stocks.

Dividends

Kirkland Lake Gold pays an annual dividend of $0.09 per share and has a dividend yield of 0.5%. Franco Nevada pays an annual dividend of $0.96 per share and has a dividend yield of 1.6%. Kirkland Lake Gold pays out 12.7% of its earnings in the form of a dividend. Franco Nevada pays out 88.9% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Franco Nevada has increased its dividend for 5 consecutive years. Franco Nevada is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Summary

Franco Nevada beats Kirkland Lake Gold on 10 of the 15 factors compared between the two stocks.

Kirkland Lake Gold Company Profile

Kirkland Lake Gold Ltd. engages in the exploration and development of gold properties. The company owns and operates four underground gold mines, including the Macassa mine, the Holt mine, and the Taylor mine in Ontario, Canada; and the Fosterville Mine in Victoria, Australia, as well as three milling facilities in Canada and Australia. The company was formerly known as Newmarket Gold Inc. and changed its name to Kirkland Lake Gold Ltd. in December 2016. Kirkland Lake Gold Ltd. was founded in 1983 and is headquartered in Toronto, Canada.

Franco Nevada Company Profile

Franco-Nevada Corporation operates as a gold-focused royalty and stream company in the United States, Canada, Mexico, Peru, Chile, Australia, and Africa. The company also holds interests in silver, platinum group metals, oil and gas, and other resource assets. As of December 31, 2017, it had a portfolio of 341 assets. The company was incorporated in 2007 and is headquartered in Toronto, Canada.

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