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Wall Street's Vision of Gold ahead of the 2Q17 Earnings

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Part 6
Wall Street's Vision of Gold ahead of the 2Q17 Earnings PART 6 OF 11

These Factors Are Impacting Ratings for Royalty and Streaming Companies

Performances of royalty and streaming companies

Royalty and streaming companies significantly outperformed the benchmark index (GDX) in the first half of 2017. As a group, these companies rose 19% in 1H17, compared with GDX’s rise of 5.5%. There is, however, significant divergence in the price performances of the individual companies in this group.

These Factors Are Impacting Ratings for Royalty and Streaming Companies

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Royal Gold (RGLD) was the top-performing royalty company in 1H17, rising 23.4%. Franco-Nevada (FNV) gained 20.7%, and Wheaton Precious Metals Group (SLW) rose 3.0%, while Sandstorm Gold (SAND) fell 1% during the same period.

Ratings for royalty companies

The business model of royalty and streaming companies is usually more stable than that of miner peers, and their cash flows are more predictable. For this reason, analysts don’t have any “sell” ratings for any of these stocks.

Wheaton Precious Metals, which used to go by the name of Silver Wheaton, seems to be the analysts’ favorite in this space, with 92.0% “buy” ratings and 8.0% “hold” ratings. Sandstorm trails, with 80.0% “buy” ratings, while 71% are recommending a “hold” for FNV’s stock.

Changes in ratings

Analysts’ ratings have changed the most for FNV since the start of the year. The company had only 12.5% “buy” ratings at the beginning of 2017, compared with its 29% now. The “buy” ratings for Royal Gold have declined from 77% at the start of the year to 62% now.

SAND has the highest upside potential of 51%, based on its target price and current market price. WPM has an upside potential of 40.3%. In addition to the lowest “buy” percentage ratings, FNV also has the lowest upside potential of 4.0%.

In the next part, we’ll take a look at the recent rating changes for royalty and streaming companies.

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