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

Profitability

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

Net Margins Return on Equity Return on Assets
Franco Nevada 32.94% 4.80% 4.72%
Newmont Mining 2.23% 6.17% 3.53%

Volatility & Risk

Franco Nevada has a beta of -0.17, suggesting that its stock price is 117% less volatile than the S&P 500. Comparatively, Newmont Mining has a beta of 0.21, suggesting that its stock price is 79% less volatile than the S&P 500.

Valuation & Earnings

This table compares Franco Nevada 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
Franco Nevada $675.00 million 18.41 $194.70 million $1.08 61.79
Newmont Mining $7.35 billion 2.33 -$98.00 million $1.46 21.94

Franco Nevada has higher earnings, but lower revenue than Newmont Mining. Newmont Mining 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

Franco Nevada pays an annual dividend of $0.96 per share and has a dividend yield of 1.4%. Newmont Mining pays an annual dividend of $0.56 per share and has a dividend yield of 1.7%. 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. Newmont Mining pays out 38.4% of its earnings in the form of a dividend. Franco Nevada has raised its dividend for 5 consecutive years and Newmont Mining has raised its dividend for 2 consecutive years. Newmont Mining is clearly the better dividend stock, given its higher yield and lower payout ratio.

Insider and Institutional Ownership

63.7% of Franco Nevada shares are held by institutional investors. Comparatively, 81.9% of Newmont Mining shares are held by institutional investors. 0.4% of Newmont Mining shares are held by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock is poised for long-term growth.

Analyst Ratings

This is a breakdown of recent recommendations for Franco Nevada and Newmont Mining, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Franco Nevada 0 5 4 0 2.44
Newmont Mining 1 6 4 0 2.27

Franco Nevada presently has a consensus target price of $95.17, indicating a potential upside of 42.61%. Newmont Mining has a consensus target price of $43.40, indicating a potential upside of 35.50%. Given Franco Nevada’s stronger consensus rating and higher possible upside, research analysts clearly believe Franco Nevada is more favorable than Newmont Mining.

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.

Newmont Mining Company Profile

Newmont Mining Corporation, together with its subsidiaries, operates in the mining industry. The company primarily acquires, develops, explores for, and produces gold, copper, and silver. Its operations and/or assets are located in the United States, Australia, Peru, Ghana, and Suriname. As of February 22, 2018, the company had proven and probable gold reserves of 68.5 million ounces and an aggregate land position of approximately 23,000 square miles. Newmont Mining Corporation was founded in 1916 and is headquartered in Greenwood Village, Colorado.

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