Financial Analysis: Centerra Gold (NYSE:CGAU) versus Royal Gold (NASDAQ:RGLD)

Centerra Gold (NYSE:CGAU) and Royal Gold (NASDAQ:RGLD) are both basic materials companies, but which is the superior business? We will contrast the two companies based on the strength of their analyst recommendations, risk, earnings, dividends, institutional ownership, valuation and profitability.

Volatility & Risk

Centerra Gold has a beta of 0.88, meaning that its share price is 12% less volatile than the S&P 500. Comparatively, Royal Gold has a beta of 0.41, meaning that its share price is 59% less volatile than the S&P 500.

Analyst Ratings

This is a summary of recent recommendations for Centerra Gold and Royal Gold, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Centerra Gold	0	6	3	2	2.64
Royal Gold	1	1	7	1	2.80

Centerra Gold presently has a consensus target price of $12.83, suggesting a potential upside of 16.30%. Royal Gold has a consensus target price of $214.11, suggesting a potential upside of 16.63%. Given Royal Gold’s stronger consensus rating and higher possible upside, analysts clearly believe Royal Gold is more favorable than Centerra Gold.

Earnings & Valuation

This table compares Centerra Gold and Royal Gold”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Centerra Gold	$1.21 billion	1.84	$80.39 million	$0.33	33.44
Royal Gold	$719.40 million	16.80	$332.02 million	$6.82	26.92

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

Profitability

This table compares Centerra Gold and Royal Gold’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Centerra Gold	6.21%	9.12%	6.69%
Royal Gold	56.24%	13.30%	12.32%

Dividends

Centerra Gold pays an annual dividend of $0.20 per share and has a dividend yield of 1.8%. Royal Gold pays an annual dividend of $1.80 per share and has a dividend yield of 1.0%. Centerra Gold pays out 60.6% of its earnings in the form of a dividend. Royal Gold pays out 26.4% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Royal Gold has raised its dividend for 25 consecutive years.

Insider and Institutional Ownership

55.4% of Centerra Gold shares are owned by institutional investors. Comparatively, 83.7% of Royal Gold shares are owned by institutional investors. 0.2% of Centerra Gold shares are owned by company insiders. Comparatively, 0.5% of Royal Gold shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company is poised for long-term growth.

Summary

Royal Gold beats Centerra Gold on 13 of the 18 factors compared between the two stocks.

About Centerra Gold

Centerra Gold Inc., a gold mining company, engages in the acquisition, exploration, development, and operation of gold and copper properties in North America, Turkey, and internationally. The company explores for gold, copper, and molybdenum deposits. Its flagship projects are the 100% owned Mount Milligan gold-copper mine located in British Columbia, Canada; and the Öksüt gold mine located in Turkey. The company was incorporated in 2002 and is based in Toronto, Canada.

About Royal Gold

Royal Gold, Inc., together with its subsidiaries, acquires and manages precious metal streams, royalties, and related interests. The company engages in acquiring stream and royalty interests or to finance projects that are in production, development, or in the exploration stage in exchange for stream or royalty interests, which primarily consists of gold, silver, copper, nickel, zinc, lead, and other metals. Its stream and royalty interests on properties are located in the United States, Canada, Chile, the Dominican Republic, Australia, Africa, Mexico, Botswana, and internationally. Royal Gold, Inc. was incorporated in 1981 and is headquartered in Denver, Colorado.