Streaming companies provide venture capital for mining companies in exchange for an interest in mine production. Such companies offer leveraged exposure to the underlying commodity at a reduced risk compared to mining companies.
It has become a monthly routine to update our readers on analysts' targets and recommendations for gold miners, silver miners and precious metals streaming companies. We would like to offer our December edition for precious metals streaming companies in the following.
As in previous editions of this series, we will be presenting current analyst price targets as provided by Yahoo.com. The present installment for the month of November summarizes our current data and reports on changes in price targets since our November edition in this series of articles.
Not all analysts release their predictions to Yahoo.com. Instead, in many cases analyst data are considered as proprietary information only available to subscribers of the analysts' services. It is for this reason that our data base may consider fewer analysts than actually follow some of the companies.
The table below summarizes our data. The first three columns list the company names, ticker symbols and share prices 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 numbers of analysts providing data to Yahoo.com and the mean recommendations 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 differences between the share price and the median target price. The column titled "high-low" gives the differences between the high and the low targets. The last four columns titled "target change" document the changes in price targets since the November report with the last columns giving the average change over the low, median and high price targets.
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 between the current share price and the median price target can indicate a high potential for share price increase during the coming 12 months. Caution needs to be exercised, however, since catalytic events typically take some time until they are reflected in analysts' price targets.
Sandstorm Gold is trading almost 70% below the median price target followed by Silver Wheaton (62% below median target) and Royal Gold (41% below median target). The fourth precious metal streamer Franco-Nevada is trading less than 20% below the median price target suggesting the smallest upside potential of the four companies.
"High-low." Small differences between high and low targets indicate that analysts concur on the price targets whereas a high difference indicates diverging analyst opinions.
Royal Gold's targets are much less contentious and analysts are more or less in agreement about Sandstorm Gold's price targets which we take special note of considering the potential assigned to Sandstorm Gold.
"Target change average." This diagram visualizes the average target change since the beginning of November. All price targets have been cut again during the past month by an average of 14.5% with Sandstorm Gold being the hardest hit among the four companies.
"Recommendation." The analysts' investment recommendation expressed on a scale from 1 to 5 with 1 indicating a "strong buy," and 5 indicating a "sell" recommendation. No changes have been recorded from last month and the diagram as shown below has remained the same.
As indicated above, we have been using only analyst data available from Yahoo.com for this series of articles. We had an opportunity to compare this data sub-set with a more complete set of analyst data sourced directly from the various sources covering the four stocks. Thanks are due to fellow author Hyperinflation at this point. The following table compares our data as used above with the more complete data.
As can be seen, the median/mean values correlate well. The price target range and recommendation value do not compare as well and are presumably affected by delays in updating targets on Yahoo.com and the lower number of analysts providing data. However, we believe that these effects should even out over time.
Disclosure: I am long SLW, SAND. 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.