Nyse Order Imbalance 141549.0 Shares On Buy Side

Investors with an interest in Mining - Gold stocks have likely encountered both Newmont Corporation (NEM) and Alamos Gold (AGI). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.

There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.

Newmont Corporation has a Zacks Rank of #2 (Buy), while Alamos Gold has a Zacks Rank of #3 (Hold) right now. This means that NEM's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one piece of the puzzle for value investors.

Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their current share price levels.

Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.

NEM currently has a forward P/E ratio of 13.65, while AGI has a forward P/E of 24.57. We also note that NEM has a PEG ratio of 0.35. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. AGI currently has a PEG ratio of 0.84.

Another notable valuation metric for NEM is its P/B ratio of 1.64. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, AGI has a P/B of 2.24.

These metrics, and several others, help NEM earn a Value grade of B, while AGI has been given a Value grade of C.

NEM is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that NEM is likely the superior value option right now.

Zacks Investment Research

A downtrend has been apparent in Alamos Gold (AGI) lately with too much selling pressure. The stock has declined 7.4% over the past four weeks. However, given the fact that it is now in oversold territory and Wall Street analysts are majorly in agreement about the company's ability to report better earnings than they predicted earlier, the stock could be due for a turnaround.

Here is How to Spot Oversold Stocks

We use Relative Strength Index (RSI), one of the most commonly used technical indicators, for spotting whether a stock is oversold. This is a momentum oscillator that measures the speed and change of price movements.

RSI oscillates between zero and 100. Usually, a stock is considered oversold when its RSI reading falls below 30.

Technically, every stock oscillates between being overbought and oversold irrespective of the quality of their fundamentals. And the beauty of RSI is that it helps you quickly and easily check if a stock's price is reaching a point of reversal.

So, by this measure, if a stock has gotten too far below its fair value just because of unwarranted selling pressure, investors may start looking for entry opportunities in the stock for benefitting from the inevitable rebound.

However, like every investing tool, RSI has its limitations, and should not be used alone for making an investment decision.

Here's Why AGI Could Experience a Turnaround

The heavy selling of AGI shares appears to be in the process of exhausting itself, as indicated by its RSI reading of 29.57. So, the trend for the stock could reverse soon for reaching the old equilibrium of supply and demand.

Growth stocks are attractive to many investors, as above-average financial growth helps these stocks easily grab the market's attention and produce exceptional returns. But finding a great growth stock is not easy at all.

In addition to volatility, these stocks carry above-average risk by their very nature. Also, one could end up losing from a stock whose growth story is actually over or nearing its end.

However, the task of finding cutting-edge growth stocks is made easy with the help of the Zacks Growth Style Score (part of the Zacks Style Scores system), which looks beyond the traditional growth attributes to analyze a company's real growth prospects.

Alamos Gold (AGI) is one such stock that our proprietary system currently recommends. The company not only has a favorable Growth Score, but also carries a top Zacks Rank.

Studies have shown that stocks with the best growth features consistently outperform the market. And for stocks that have a combination of a Growth Score of A or B and a Zacks Rank #1 (Strong Buy) or 2 (Buy), returns are even better.

While there are numerous reasons why the stock of this gold mining company is a great growth pick right now, we have highlighted three of the most important factors below:

Earnings Growth

Arguably nothing is more important than earnings growth, as surging profit levels is what most investors are after. And for growth investors, double-digit earnings growth is definitely preferable, and often an indication of strong prospects (and stock price gains) for the company under consideration.

While the historical EPS growth rate for Alamos Gold is 15.5%, investors should actually focus on the projected growth. The company's EPS is expected to grow 47.5% this year, crushing the industry average, which calls for EPS growth of 45.6%.

Cash Flow Growth

While cash is the lifeblood of any business, higher-than-average cash flow growth is more important and beneficial for growth-oriented companies than for mature companies. That's because, growth in cash flow enables these companies to expand their businesses without depending on expensive outside funds.

Right now, year-over-year cash flow growth for Alamos Gold is 42.7%, which is higher than many of its peers. In fact, the rate compares to the industry average of 3.9%.

While investors should actually consider the current cash flow growth, it's worth taking a look at the historical rate too for putting the current reading into proper perspective. The company's annualized cash flow growth rate has been 16.4% over the past 3-5 years versus the industry average of 11.1%.

Promising Earnings Estimate Revisions

Superiority of a stock in terms of the metrics outlined above can be further validated by looking at the trend in earnings estimate revisions. A positive trend is of course favorable here. Empirical research shows that there is a strong correlation between trends in earnings estimate revisions and near-term stock price movements.

There have been upward revisions in current-year earnings estimates for Alamos Gold. The Zacks Consensus Estimate for the current year has surged 3.8% over the past month.

Bottom Line

While the overall earnings estimate revisions have made Alamos Gold a Zacks Rank #2 stock, it has earned itself a Growth Score of B based on a number of factors, including the ones discussed above.

You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

This combination positions Alamos Gold well for outperformance, so growth investors may want to bet on it.

Zacks Investment Research