Financial Analysis: NovaGold Resources (NYSE:NG) versus Fortuna Silver Mines (NYSE:FSM)

NovaGold Resources (NYSE:NG – Get Rating) and Fortuna Silver Mines (NYSE:FSM – Get Rating) are both small-cap basic materials companies, but which is the superior investment? We will contrast the two companies based on the strength of their risk, earnings, valuation, analyst recommendations, institutional ownership, profitability and dividends.

Analyst Ratings

This is a summary of current recommendations and price targets for NovaGold Resources and Fortuna Silver Mines, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
NovaGold Resources	0	0	0	0	N/A
Fortuna Silver Mines	0	0	1	0	3.00

Fortuna Silver Mines has a consensus target price of $6.00, indicating a potential upside of 73.91%. Given Fortuna Silver Mines’ higher probable upside, analysts clearly believe Fortuna Silver Mines is more favorable than NovaGold Resources.

Volatility and Risk

NovaGold Resources has a beta of 0.81, suggesting that its share price is 19% less volatile than the S&P 500. Comparatively, Fortuna Silver Mines has a beta of 1.25, suggesting that its share price is 25% more volatile than the S&P 500.

Institutional & Insider Ownership

53.9% of NovaGold Resources shares are owned by institutional investors. Comparatively, 26.8% of Fortuna Silver Mines shares are owned by institutional investors. 3.3% of NovaGold Resources shares are owned by insiders. Comparatively, 1.0% of Fortuna Silver Mines shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock will outperform the market over the long term.

Valuation and Earnings

This table compares NovaGold Resources and Fortuna Silver Mines’ top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
NovaGold Resources	N/A	N/A	-$53.34 million	($0.16)	-36.06
Fortuna Silver Mines	$599.85 million	1.67	$59.40 million	$0.14	24.64

Fortuna Silver Mines has higher revenue and earnings than NovaGold Resources. NovaGold Resources is trading at a lower price-to-earnings ratio than Fortuna Silver Mines, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares NovaGold Resources and Fortuna Silver Mines’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
NovaGold Resources	N/A	-109.50%	-30.80%
Fortuna Silver Mines	5.76%	4.63%	3.27%

Summary

Fortuna Silver Mines beats NovaGold Resources on 10 of the 12 factors compared between the two stocks.

About NovaGold Resources

(Get Rating)

NovaGold Resources, Inc. is a mineral exploration company, which engages in the development of the Donlin Gold project in Alaska. The company was founded by Gregory Shawn Johnson, John W. Chisholm, Macisaac G. Angus, Rick van Nieuwenhuyse, and Gerald James McConnell on December 5, 1984 and is headquartered in Salt Lake City, UT.

About Fortuna Silver Mines

(Get Rating)

Fortuna Silver Mines, Inc. engages in the exploration, extraction and processing of precious and base metal in Latin America. It operates through the following segments: Minera Bateas S.A.C (Bateas), Compania Minera Cuzcatlan S.A. de C.V. (Cuzcatian), Mansfield Minera S.A. (Mansfield), and Corporate. The Beates segment operates the Caylloma silver, lead, and zinc mine. The Cuzcatlan segment handles the San Jose silver-gold mine. The Mansfield segment constructs the Lindero mine. The Corporate segment represents the corporate stewardship. The company was founded by Jorge Alberto Ganoza Durant, Simon T. P. Ridgway, and Mario David Szotlender on September 4, 1990 and is headquartered in Vancouver, Canada.