• If you are asking yourself whether Royal Gold is still fairly priced after its strong run, this article will walk through what the current share price might be implying.
• Royal Gold's share price last closed at US$286.10, with stated returns of 2.5% over 7 days, 7.9% over 30 days, 29.4% year to date, 96.7% over 1 year, 143.0% over 3 years and 175.3% over 5 years.
• Recent coverage around Royal Gold has focused on its role as a precious metals royalty and streaming company, which can behave differently to traditional miners when sentiment around commodities shifts. This context helps frame why the stock's performance profile looks the way it does and why investors are paying attention to how its business model is being valued.
• Despite that backdrop, Royal Gold currently has a valuation score of 1 out of 6. We will look at what different valuation methods say about the stock and then finish with a way of thinking about valuation that goes beyond the usual models.

Royal Gold scores just 1/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Royal Gold Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow, or DCF, model takes estimates of a company’s future cash flows and discounts them back to today using a required rate of return, to arrive at an estimate of what the business might be worth per share.

For Royal Gold, the model used is a 2 Stage Free Cash Flow to Equity approach. The latest twelve month free cash flow figure is given as $13.09 million. Analysts have provided explicit free cash flow projections through to 2029, with Simply Wall St extrapolating additional estimates out to 2035. For example, projected free cash flow for 2029 is $1,289.00 million, and the ten year projection set ranges between about $1,284.79 million and $1,514.00 million before discounting those values back to today.

Putting all of those discounted cash flows together, the DCF model arrives at an estimated intrinsic value of about $272.73 per share. Compared with the recent share price of $286.10, this suggests the stock is roughly 4.9% above this estimate on this measure, which is a relatively small gap.

Result: ABOUT RIGHT

Royal Gold is fairly valued according to our Discounted Cash Flow (DCF), but this can change at a moment's notice. Track the value in your watchlist or portfolio and be alerted on when to act.

Approach 2: Royal Gold Price vs Earnings

For a profitable company like Royal Gold, the P/E ratio is a useful way to link what you pay for each share to the earnings that support that price. It gives you a quick shorthand for how many years of current earnings the market is willing to pay for.

What counts as a “normal” P/E depends on what investors expect for future growth and how much risk they see in those earnings. Higher expected growth or lower perceived risk can justify a higher P/E, while slower growth or higher risk usually means investors look for a lower multiple.

Royal Gold currently trades on a P/E of 50.30x, compared with a Metals and Mining industry average of about 25.28x and a peer average of 26.57x. Simply Wall St’s Fair Ratio for Royal Gold is 53.34x, which is its proprietary estimate of what the P/E might be given factors like earnings growth, industry, profit margins, market cap and risk profile.

Because the Fair Ratio directly incorporates those company specific drivers, it can be more tailored than a simple comparison to peers or the broad industry. With Royal Gold’s actual P/E of 50.30x sitting below the Fair Ratio of 53.34x, this approach suggests the shares may be undervalued on this metric.

Result: UNDERVALUED

P/E ratios tell one story, but what if the real opportunity lies elsewhere? Start investing in legacies, not executives. Discover our 23 top founder-led companies.

Upgrade Your Decision Making: Choose your Royal Gold Narrative

Earlier we mentioned that there is an even better way to understand valuation. On Simply Wall St you can use Narratives, which let you set out your own story for Royal Gold by linking assumptions for future revenue, earnings and margins to a financial forecast. You can then compare your Fair Value to today’s price and watch that view update automatically as new news or earnings arrive, all while seeing how different investors in the Community can look at the same company and reach very different Fair Values. For example, a more cautious view might be closer to about US$211 per share, whereas a more optimistic view might be near US$356 per share.

Do you think there's more to the story for Royal Gold? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.