Precious Metal Streamers Analyst Watch: September Edition

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 |  Includes: FNV, RGLD, SAND, SLW
by: Itinerant

Streaming companies provide venture capital for mining companies in exchange for an interest in mine production. Such companies provide leveraged exposure to the underlying commodity at a reduced risk compared to mining companies.

Throughout this year we have been keeping records of analyst price targets provided free of charge through Yahoo.com. This article summarizes our data for precious metal streaming companies and reports on changes in price targets since our August edition in this series. In our database we are considering four precious metal streaming companies: Silver Wheaton (NYSE:SLW), Franco-Nevada (NYSE:FNV), Royal Gold (NASDAQ:RGLD) and Sandstorm Gold (NYSEMKT:SAND). All four companies mentioned in this article may have more analysts following their progress than considered in our database. This difference is due to the fact that not all analysts release their predictions to Yahoo.com preferring to disclose their results to subscribers only.

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 to Yahoo.com 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 derived from our source data. These data points are given in percentages related to the share price at the time of writing. 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 August report with the last columns giving the average change over the low, median and high price targets.

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The four diagrams below visualize four columns from the table above: "median-price," "high-low," target change average" and "recommendation."

"Median-price." A relatively high difference in between the current share price and the median price target can potentially indicate a high potential for share price increase during the coming 12 months. Franco-Nevada seems to be priced close to analysts' expectations even trading slightly above the median price target. The three other companies are all trading around 20% below the median target price.

"High-low." Small differences between high and low targets indicate that analysts concur in general on the price targets whereas a high difference indicates diverging analyst opinions. Disagreement among analysts is relatively high for Silver Wheaton and Franco-Nevada.

"Target change average." This indicates the average target change since early June. Price targets for Sandstorm Gold have been cut quite significantly during the past months, while all other companies have received slight upgrades.

"Recommendation." The analysts' investment recommendation expressed on a scale from 1 to 5. Silver Wheaton remains the analysts' darling out of the considered group of companies.

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Our pick of the month

The repeated cut in price targets observed during previous months has finally abated. The recent uptrend in the underlying commodity price has presumably stabilized the share prices. Investment analysts seem to like Silver Wheaton best of this group of four streaming companies, and we find it difficult not to concur.

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.