TD Securities released a new rating for Franco-Nevada Corp. (FNV, Financial) on March 26 with new target prices.
The gold royalty and stream company was upgraded by Greg Barnes, an analyst at the Canadian investment bank, from hold to buy with a target price of $83 per share, as reported by the Financial Post.
TD Securities’ upgrade is the fourth upgrade in a total of nine ratings delivered by analysts over the last 12 months and is preceded by three upgrades, two of them in a row. The most recent one is from Goldman Sachs (sell to neutral) on Feb. 2. The gold stock was also upgraded by Credit Suisse (neutral to outperform) on Jan. 1 and by Deutsche Bank (sell to hold) on Sept. 2, 2016.
During this period, Franco-Nevada also received three downgrades, and Desjardins (to buy) and Bank of America Merrill Lyncy (to buy) initiated coverage of the Canadian company last year.
The new target price represents an 18.7% upside from the average target price of $69.90 per share, which ranges between a low price of $60 and a high price of $80 per share.
Franco-Nevada is currently trading around $66.41 per share. According to Barnes, the firm sees a substantial 25% increase in the stock's market value because "at a time when many gold producers are struggling to keep production flat, Franco’s fully-funded growth profile sets it apart.”
He added, “management noted that it expects to be active in writing stream agreements with base metal and precious metal miners as the next wave of mine development gets underway."
Barnes' analysis reflects the outlook of the company's CEO, David Harquail, that he discussed in a Bloomberg interview several weeks ago. In the interview, Harquail gave a negative outlook for gold mining as mineral deposits are running out. As a result, his company is exploring other possibilites such as oil and gas to buffer its income.
Franco-Nevada bought U.S. royalty assets for $100 million last year and plans to establish more agreements in that industry in order to diversify the company’s portfolio.
As of today, the recommendation rating for Franco-Nevada is 2.9. The rating ranges between 1.0 (Strong Buy) and 5.0 (Sell).
The miner has
The miner has been uptrending since mid-March and has gained nearly 11.13% year to date. The price-book (P/B) ratio is 2.83, the price-sales (P/S) ratio is 19.80 and the forward price-earnings (P/E) ratio is 74.62. The Canadian miner has an enterprise value of $11.27 billion and the EV/EBITDA ratio is 23.36.
Disclosure: I have no position in Franco-Nevada Corp.
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