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Why Analysts Are Positive about Royal Gold’s Future

Anuradha Garg - Author
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Dec. 26 2017, Updated 4:00 p.m. ET

Factors impacting Royal Gold’s estimates

Due to its solid performance YTD (year-to-date) and bright outlook, Royal Gold (RGLD) is attracting a lot of interest from the analyst community. TD Securities initiated coverage of Royal Gold on December 8, 2017, with a “buy” rating. It gave a target price of $110 for the stock. The firm has a well-diversified, high-quality portfolio that’s fully funded.

Given the stock’s potentially brighter outlook, analysts are also revising their estimates higher.

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Analysts’ revenue estimates

Before we delve into the company’s consensus estimates, we should note that RGLD’s fiscal year ends on June 30. The consensus is calling for revenue of $482.5 million for fiscal 2018. That implies a YoY (year-over-year) growth of 9.5%. Royal Gold’s actual growth in revenues is still higher at 22.5% for fiscal 2017. While 2017 turned out to be a record year for the company, it’s still far from reaching a peak. Analysts are forecasting growth of 6.2% for fiscal 2019 and 2% for fiscal 2020.

Analysts’ earnings estimates

Not only are analysts positive on the future growth prospects of the company, they expect the additional growth to come at lower costs. That’s the reason for their projection of higher margins going forward. While the company had an EBITDA (earnings before interest, tax, depreciation, and amortization) margin of 69.3% in fiscal 2017, analysts are estimating margins to grow continuously. They’re projecting 72.1%, 73.4%, and 75.7% for fiscal 2018, fiscal 2019, and fiscal 2020, respectively.

In the royalty and streaming space (GOAU), Franco-Nevada (FNV) has higher margin estimates than Royal Gold at 78.1%. Wheaton Precious Metals (WPM), previously known as Silver Wheaton (SLW), has a forward margin of 68.8%, while Sandstorm Gold (SAND) has a margin of 67.6%.

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