What Affects Analyst Ratings for Royalty and Streaming Companies?



Performances of royalty and streaming companies

Among the precious metals subgroups, royalty and streaming companies have substantially underperformed the other miners. This underperformance is mainly due to the lower beta these companies have over gold prices (GLD)(IAU). While other groups of miners have fallen lately due to fears of a Fed rate hike, these miners have started gaining traction.

Silver Wheaton (SLW) is the top-performing royalty company with a YTD (year-to-date) rise of 95.0% through October 21, 2016. Following closely is Sandstorm Gold (SAND) with a rise of 90.0% and Royal Gold (RGLD) with a rise of 84.0%. Franco-Nevada (FNV) has underperformed with a rise of just 41.0% YTD.

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Ratings for royalty companies

Royalty and streaming companies are more stable since their cash flows are much more predictable than cash flows for miners. This stability is probably why analysts don’t have many “sell” ratings on these stocks. Among the four companies we mentioned above, only Franco-Nevada has a “sell” rating.

Silver Wheaton is analysts’ favorite stock in this space. It has 87.0% “buy” ratings and 13.0% “hold” ratings. Sandstorm Gold follows with 78.0% “buy” ratings.

Changes in ratings

Analysts’ ratings have changed the most for Royal Gold since the start of 2016. While the company had 88.0% “buy” ratings on January 1, 2016, it had 77.0% “buy” ratings on October 21, 2016.

All the streaming companies have upside potentials based on their target prices. While Silver Wheaton has an upside potential of 34.0%, Franco-Nevada could rise 19.0% based on analysts’ average target price.

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


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