Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.
NEW YORK (
TheStreet)
-- Franco-Nevada (NYSE:
FNV) has been upgraded by TheStreet Ratings from sell to hold. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, expanding profit margins and solid stock price performance. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity, premium valuation and feeble growth in the company's earnings per share.
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Highlights from the ratings report include:
- FNV has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 35.51, which clearly demonstrates the ability to cover short-term cash needs.
- The gross profit margin for FRANCO-NEVADA CORP is currently very high, coming in at 85.49%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 34.00% significantly outperformed against the industry average.
- Compared to its closing price of one year ago, FNV's share price has jumped by 60.30%, exceeding the performance of the broader market during that same time frame. Setting our sights on the months ahead, however, we feel that the stock's sharp appreciation over the last year has driven it to a price level which is now relatively expensive compared to the rest of its industry. The implication is that its reduced upside potential is not good enough to warrant further investment at this time.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Metals & Mining industry and the overall market on the basis of return on equity, FRANCO-NEVADA CORP underperformed against that of the industry average and is significantly less than that of the S&P 500.
Franco-Nevada Corporation operates as a gold-focused royalty and stream company in the United States, Canada, Mexico, Australia, and Africa. The company also has interests in platinum group metal, oil and gas, and other resource properties. Franco-Nevada has a market cap of $8.45 billion and is part of the basic materials sector and metals & mining industry. Shares are up 38% year to date as of the close of trading on Wednesday.
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