Osisko Gold Royalties vs. Centerra: Which Stock is a Better Buy?

Centerra Gold Inc. (CGAU) is a gold mining company that acquires, explores, and develops gold and copper properties in North America and globally. The company’s principal project includes the 100% owned Mount Milligan gold-copper mine, located in British Columbia. It is headquartered in Toronto, Canada. In comparison, Osisko Gold Royalties Ltd (OR), which is headquartered in Montreal, Canada, primarily explores for gold and base metals. The company also owns options on royalty and stream financings.

Earlier this week, gold prices hit a one-month high, nearly touching the $2,000 per ounce mark, as Russia-Ukraine concerns and the economic issues due to COVID-19 restrictions in China drove a safe-haven bid for the yellow metal. Furthermore, the SPDR Gold Shares (GLD) ETF has gained 6.9% year-to-date, while the broader SPDR S&P 500 ETF Trust (SPY) has declined 6.4% over the same period. CGAU and OR are prominent gold mining stocks and might benefit from this scenario.

Over the past year, CGAU stock has gained 12.4% in price to close yesterday’s trading session at $10.42, while OR gained 12.4% in price over the same period to close yesterday’s trading session at $14.23. CGAU has gained 35.7%, while OR has gained 16.2% year-to-date. And over the past month, OR has gained 8.3%, while CGAU gained 8.4%.

Click here to check out our Gold and Silver Industry Report for 2022

But which stock is a better buy now? Let’s find out.

Latest Developments

On February 28, CGAU announced that it had completed the acquisition of Gemfield Resources LLC, the owner of the Goldfield District Project, from Waterton Nevada Splitter, LLC. The acquisition is expected to add to the company’s operative capacity.

On March 31, 2022, OR announced the closing of its public offering of 18,600,000 common shares at $13.45 per common share. The company intends to use the net proceeds for general corporate purposes and potential repayments of outstanding under its revolving credit facility.

Recent Financial Results

For its fiscal fourth quarter, ended Dec. 31, 2021, CGAU’s revenue increased 18.4% to $251.08 million. Its net earnings and earnings per share from continuing operations came in at $274.88 million and $0.92, respectively, up 188.7% and 1,740% from the same period in the prior year.

OR’s revenue decreased 21.5% year-over-year to CAD50.67 million ($40.41 million) in its fiscal fourth quarter ended December 31. Its net earnings and net earnings per share attributable to OR came in at a negative CAD35.22 million ($28.09 million) and a negative CAD0.13, down 983.9% and 533.3%, respectively, from the prior-year period.

Past and Expected Financial Performance

CGAU’s revenue has grown at a 3.5% CAGR over the past five years. The consensus EPS estimate for fiscal 2022 indicates a 32.5% year-over-year increase. And the consensus revenue estimate for the same year reflects a 29.5% rise from the prior year.

On the other hand, OR’s revenue has grown at a 29.1% CAGR over the past five years. The Street EPS and revenue estimates for fiscal 2022 reflect a 25% and 13.7% respective year-over-year decrease.

Profitability

CGAU’s $900.14 million trailing 12-months revenue is 5.1 times what OR generates. Also, CGAU is more profitable in terms of its trailing 12-month EBIT margin and levered FCF margin of 23.30% and 67.13%, respectively, which compare to OR’s negative 20.11% and 69.91%.

CGAU’s 19.82% and 5.76% respective trailing 12-month ROE and ROT compare with OR’s negative 1.40% and 1.27%.

Hence, CGAU is more profitable here.

Valuation

In terms of its forward non-GAAP P/E, OR is trading at 40.90x, which is 268.8% higher than CGAU’s 11.09x. OR’s 16.80 forward EV/Sales multiple is 798.4% higher than CGAU’s 1.87 multiple. In terms of its forward EV/EBITDA, OR is trading at 25.11x, which is 523.1% higher than CGAU’s 4.03x.

Thus, CGAU is relatively affordable here.

POWR Ratings

CGAU has an overall A rating, which equates to Strong Buy in our proprietary POWR Ratings system. In comparison, OR has an overall D rating, which translates to Sell. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

CGAU has a Quality grade of A, which is in sync with its trailing 12-month levered FCF margin of 67.13%, which is 1,039.98% higher than the 5.89% industry average. In in contrast, OR has a D grade for Quality, which is justified by its negative 69.91% trailing 12-month levered FCF margin.

CGAU has a B grade for Value, which is consistent with its 11.09 forward non-GAAP P/E multiple, which is 18.4% lower than the 13.58 industry average. In contrast, OR has a Value grade of D, which is in sync with its forward non-GAAP P/E multiple of 40.90, which is 201.2% higher than the industry average.

Among the 37-stock Miners – Gold industry, CGAU is ranked #1, while OR is ranked #32.

Click here to see the additional POWR Ratings for CGAU. Get all the OR ratings here.

Note that CGAU is one of the few stocks handpicked by our Chief Growth Strategist, Jaimini Desai, currently in the POWR Stocks Under $10 portfolio. Learn more here.

Winner

Gold’s appeal as a safe haven asset might benefit gold mining stocks CGAU and OR. However, considering CGAU’s higher profit margins, relative affordability, and sound fundamentals, we think it might be the better buy here.

Our research shows that odds of success increase when one invests in stocks with an Overall Rating of Strong Buy or Buy. View all the top-rated stocks in the Miners – Gold industry here.

Click here to check out our Gold and Silver Industry Report for 2022

CGAU shares were trading at $9.72 per share on Thursday afternoon, down $0.70 (-6.72%). Year-to-date, CGAU has gained 27.25%, versus a -7.21% rise in the benchmark S&P 500 index during the same period.

Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research.

More...