Keeping an eye on analysts and their price targets can at times provide additional data points when making investment decisions. We have been doing just that for some time now, focusing on stocks related to the precious metal space and have been reporting our observations on a monthly basis. This article provides an update for royalty and streaming companies. These companies provide venture capital for mining companies in exchange for an interest in mine production. Since our May update we have decided to report on streaming companies separately rather than in conjunction with mining stocks, and also provide some additional data in comparison with previous offerings.
In our records we are considering analyst data for the following metal streaming companies: Silver Wheaton (NYSE:SLW), Franco Nevada (NYSE:FNV), Royal Gold (NASDAQ:RGLD) and Sandstorm Gold (NYSEMKT:SAND). Sandstorm Gold is only covered by one single analyst and Franco Nevada is covered by two analysts while the other two companies have coverage of 12 and nine analysts respectively.
The table below summarizes our data. The first three columns list the company name, ticker symbol and share price at the time of writing. Price targets (low, median and high) are listed in the following three columns. These targets are followed by a column giving the number of analysts providing data and the mean recommendation given by these analysts ranging from 1.0 (strong buy) to 5.0 (sell). This concludes the data sourced directly from Yahoo.com.
The following columns are colored in light green and contain data given in percentages related to the share price at the time of writing as documented in the third column. The column titled "median-price" gives the difference between the share price and the median target price. The column titled "high-low" gives the difference between the high and the low target. The last four columns titled "target change" document the changes in price targets since the May report with the last columns giving the average change over the low, median and high-price targets.
We are especially interested in the following three measures documented in the table above:
- Column "median-price" indicates the potential of the stock as far as analyst targets are concerned.
- Column "high-low" measures the divergence in analyst opinions.
- Column "target change average" gives a measurement for the change in targets during the past month.
The results for these three columns for silver miners are visualized in the three diagrams below.
Silver Wheaton still seems to be considered the stock in our watch list with the greatest potential judging from the price targets provided by analysts. The median price target has come down to $40 from $48.50 three months ago, with shares currently trading with a $23 handle. Even the lowest price target of $33 would represent a healthy 30% margin from current levels.
Price targets for Silver Wheaton also display the greatest spread between the high and the low target. We presume that this disagreement between analysts is related to increased debt levels and uncertainty surrounding the completion of the Pascua Lama mine by Barrick Gold for which Silver Wheaton has a cornerstone streaming agreement (as has Royal Gold).
Silver Wheaton has been getting a constant 1.7 recommendation from analysts consistently beating peers and also precious metal miners in this category. The chart below illustrates the share price development and the price target development over the past three months.
A price target cut of 10.6% on average over high, low and median targets for Royal Gold is the main issue to report for the other streaming companies.
Franco Nevada's price targets have changed only insignificantly during the past month and the one analyst covering Sandstorm Gold has also seen no reason to update findings.
Disclosure: I am long SAND, SLW. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.