Critical Analysis: AngloGold Ashanti Limited (AU) and Royal Gold (RGLD)

AngloGold Ashanti Limited (NYSE: AU) and Royal Gold (NASDAQ:RGLD) are both mid-cap basic materials companies, but which is the superior investment? We will compare the two companies based on the strength of their profitability, analyst recommendations, risk, institutional ownership, dividends, valuation and earnings.

Dividends

AngloGold Ashanti Limited pays an annual dividend of $0.09 per share and has a dividend yield of 0.9%. Royal Gold pays an annual dividend of $0.96 per share and has a dividend yield of 1.0%. Royal Gold pays out 61.5% of its earnings in the form of a dividend. Royal Gold has raised its dividend for 12 consecutive years. Royal Gold is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Insider and Institutional Ownership

32.8% of AngloGold Ashanti Limited shares are held by institutional investors. Comparatively, 70.4% of Royal Gold shares are held by institutional investors. 1.4% of Royal Gold shares are held 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.

Profitability

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

Net Margins Return on Equity Return on Assets
AngloGold Ashanti Limited N/A N/A N/A
Royal Gold 23.03% 4.19% 3.09%

Volatility & Risk

AngloGold Ashanti Limited has a beta of -1.36, suggesting that its share price is 236% less volatile than the S&P 500. Comparatively, Royal Gold has a beta of 0.63, suggesting that its share price is 37% less volatile than the S&P 500.

Analyst Recommendations

This is a breakdown of current ratings and price targets for AngloGold Ashanti Limited and Royal Gold, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
AngloGold Ashanti Limited 1 4 2 0 2.14
Royal Gold 0 6 6 0 2.50

AngloGold Ashanti Limited presently has a consensus price target of $12.43, indicating a potential upside of 27.10%. Royal Gold has a consensus price target of $92.35, indicating a potential downside of 0.31%. Given AngloGold Ashanti Limited’s higher possible upside, equities analysts plainly believe AngloGold Ashanti Limited is more favorable than Royal Gold.

Valuation and Earnings

This table compares AngloGold Ashanti Limited and Royal Gold’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
AngloGold Ashanti Limited $4.16 billion 0.96 $1.26 billion N/A N/A
Royal Gold $439.05 million 13.79 $305.58 million $1.56 59.38

AngloGold Ashanti Limited has higher revenue and earnings than Royal Gold.

Summary

Royal Gold beats AngloGold Ashanti Limited on 11 of the 15 factors compared between the two stocks.

AngloGold Ashanti Limited Company Profile

AngloGold Ashanti Limited (AngloGold Ashanti) is a gold mining company. The Company’s business activities span the spectrum of the mining value chain. Its main product is gold. Its portfolio includes over 17 mines in approximately nine countries. It also produces silver, uranium and sulfuric acid as by-products. The Company operates through four segments: South Africa, Continental Africa, Australasia and Americas. Its South African operations comprise over four mines and surface production facilities, which include the Vaal River operations, including Kopanang and Moab Khotsong; The West Wits operations, including Mponeng and TauTona, and surface operations. It has operations in Continental Africa in locations, including Democratic Republic of the Congo, Ghana, Guinea, Mali and Tanzania. The Australasia segment includes the operations in Australia. It consists of Sunrise Dam and Tropicana. The Americas segment includes the operations in Argentina, Brazil and the United States.

Royal Gold Company Profile

Royal Gold, Inc., together with its subsidiaries, is engaged in acquiring and managing precious metal streams, royalties and similar interests. The Company operates through two segments: Acquisition and Management of Stream Interests, and Acquisition and Management of Royalty Interests. Its assets are located in Canada, Chile, Dominican Republic, Mexico, the United States, Africa, Australia and Other. As of June 30, 2016, the Company owned stream interests on four producing properties and three development-stage properties. It has investments in stream interests relating to Pueblo Viejo, Andacollo, Wassa and Prestea, and Rainy River. As of June 30, 2016, the Company owned royalty interests on 34 producing properties, 21 development-stage properties and 131 exploration-stage properties, of which it considered 50 to be evaluation-stage projects.

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