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The shares of Royal Gold Inc. (NASDAQ: RGLD) are not doing relatively well so far this year, they easily beat other options of precious metals and the wider market too. The outperformance is logical, given the strong operational performance of the gold company and the royalty company up to now in 2018. But is it still worth buying after this relatively strong race?
The figures look good
11% up to now in 2018. The S & P is up about 4%, and iShares Gold Trust is following the course of gold, is down about 3%. Streaming peers closest to the company, meanwhile, are also lagging behind Royal Gold, with Wheaton Precious Metals (NYSE: WPM) up just 1% and Franco-Nevada (NYSE: FNV) down 8%. When you look at these numbers, the performance of Royal Gold stands out
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There is a lot of good news to support this strong performance of the stock price. For example, Royal Gold's gold equivalent (GEO) production during fiscal year 2018 was online or slightly higher quarterly than in fiscal 2017. Prices realized were were higher in two quarters and less in two quarters. about stable to slightly higher for the full exercise, which ended in June. The end result of a strong production and a gold price achieved at a higher level should result in another solid year of results for Royal Gold.
At a recent conference, management has characterized the 2018 fiscal year as "stable performance with a further increase in cash flow." In the last 12 months, Royal Gold's cash flow has increased by 11% (excluding the positive impact of changes in tax legislation) compared to the cash flows of Fiscal 2017. Noting that fourth quarter production was strong, although realized prices are slightly lower, we can expect cash flow for fiscal 2018 to reach a record in 2018. The dividend was noted at the beginning of the calendar year. the series of annual dividends of the company increases up to 17 consecutive years.
Data RGLD by YCharts.
Royal Gold looks like having a good year, and the stock advance is simply a reflection of that performance.
What about the future? the past, however. The biggest question is whether Royal Gold's future remains strong enough to justify the current share price. A recent update suggests that the answer is yes
On the negative side, the Mount Milligan mine in British Columbia has been temporarily shut down which will likely result in a decline in production early in the 2019 fiscal year. Royal Gold expects these late shipments to be made in the future. In other words, this issue is likely to be a long-term failure.
On the bright side, Royal Gold saw production increase in several other key mining badets, including Wbada & Prestea in Ghana and Rainy River in Ontario. And it still has a number of growth projects in its portfolio that should also support long-term production growth. These include plans for the expansion of Wbada & Prestea, Rainy River, Cortez Crossroads in Nevada and Penasquito in Mexico. Each of these mines has unique individual stories, but the overall key story for Royal Gold is positive for production.
Meanwhile, Royal Gold has used its strong cash flow generation this year to prepare for the future. In particular, this includes the repayment of its revolving credit facility. The $ 1 billion facility was fully repaid in the fourth fiscal quarter. This gives him a lot of latitude to invest in new streaming offers that come.
RGLD of Actual Book Value Data by YCharts
In terms of valuation, the price of Royal Gold relative to the tangible book value is broadly in line with from Franco-Nevada, his closest peer, but above Wheaton. However, Wheaton has much more exposure to money than Royal Gold or Franco – Nevada. Money has not been as good as gold in recent years, so the reduction makes sense. In any case, the valuation of Royal Gold seems reasonable at this stage
Still a good option for investors in gold
The Royal Gold share price performed very well this year, with good performance operational reasons explaining the enthusiasm of investors. It also has strong prospects for the future, with mining projects making good progress and reducing debt preparing the streaming company to take advantage of future opportunities. Despite the outperformance of the stock so far during the 2018 calendar year, it appears that Royal Gold remains a decent option for most investors looking to add exposure to their wallets.
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