12/14/2018
Royal Gold Inc NASDAQ: RGLD
If inflation pressures continue or a downturn occurs before the heat death of the universe some allocation in gold will be useful. General guidance is 5 to 7%, the question is should RGLD be part of that allocation. In a weird business model, RGLD is a gold and silver "streaming" company which provides cash to miners upfront to secure reduced rates in the future.
Price at write-up $75.62
Indexes (30, 180 day looks)
VIX: 21.59 (7.84%, 74%)
TED: 40.71
S&P500: 2605 (2605, 2904) -1.7%/-10.3%
Valuation Ratios
Target: $83
Over 200 mines under contract without getting its hands dirty. RGLD's share price doesn't rise in lockstep with the price of gold, but it does bottom with it - unusual for streamers which are currently suffering far greater losses.
My Thoughts
It's currently performing poorly with declining EPS. RGLD paid off 40%of its debt which one would think would help with the operating yield but this just seems to stick at between 1-2%. More than an 80% margin on the gold sold, bought from miners at a tremendous discount, no equipment risk, or need to factor in the cost to mine - it sounds great...
Conclusion
But they aren't making much on it. The upfront cash flow provided to the miners is apparently such that they can be a middleman of little consequence, serving a valuable function in the market which is agnostic to their existence. RGLD is the back door of a commodity business, acceptable with a track record of moderately yielding dividends. At 1.33% with considerable downside risk to the principle is too great while the upside potential isn't particularly impressive for that risk. A $100 in a 3% 2 year CD is probably more valuable.
Due Diligence - BTG, FNV, GLD, IAU.
Royal Gold Inc NASDAQ: RGLD
If inflation pressures continue or a downturn occurs before the heat death of the universe some allocation in gold will be useful. General guidance is 5 to 7%, the question is should RGLD be part of that allocation. In a weird business model, RGLD is a gold and silver "streaming" company which provides cash to miners upfront to secure reduced rates in the future.
Price at write-up $75.62
Indexes (30, 180 day looks)
VIX: 21.59 (7.84%, 74%)
TED: 40.71
S&P500: 2605 (2605, 2904) -1.7%/-10.3%
Valuation Ratios
| Price/Earnings (TTM) | Neg |
| Price/Sales (TTM) | 11.67 |
| Earnings per share | -1.47 |
| Price/Book (MRQ) | 2.47 |
| Price/Cash Flow (TTM) | 82.29 |
| Held by institutions | 78.77% |
| Short interest | 2.98% |
| Dividend | 1.33% |
| MarketCap | 5.0B |
Target: $83
Over 200 mines under contract without getting its hands dirty. RGLD's share price doesn't rise in lockstep with the price of gold, but it does bottom with it - unusual for streamers which are currently suffering far greater losses.
My Thoughts
It's currently performing poorly with declining EPS. RGLD paid off 40%of its debt which one would think would help with the operating yield but this just seems to stick at between 1-2%. More than an 80% margin on the gold sold, bought from miners at a tremendous discount, no equipment risk, or need to factor in the cost to mine - it sounds great...
Conclusion
But they aren't making much on it. The upfront cash flow provided to the miners is apparently such that they can be a middleman of little consequence, serving a valuable function in the market which is agnostic to their existence. RGLD is the back door of a commodity business, acceptable with a track record of moderately yielding dividends. At 1.33% with considerable downside risk to the principle is too great while the upside potential isn't particularly impressive for that risk. A $100 in a 3% 2 year CD is probably more valuable.
Due Diligence - BTG, FNV, GLD, IAU.