Key takeaways
Royalty stocks offer stable, passive income – Since they earn revenue from top-line sales rather than managing operations, royalty companies provide reliable cash flow and attractive dividends.
Diversification across industries reduces risk – The Canadian royalty sector spans fast food, mining, and energy, allowing investors to gain exposure to different markets while minimizing operational uncertainties.
Commodity price sensitivity remains a key factor – While royalty companies avoid direct operational risks, their revenues are still tied to factors like oil, gold, and iron ore prices, making them dependent on broader market trends.
3 stocks I like better than the ones on this list.In This Article
- Franco-Nevada Corporation (FNV.TO)
- Auxly Cannabis Group Inc. (XLY.TO)
- Vox Royalty Corp. (VOXR.TO)
- Elemental Royalty Corporation (ELE.TO)
- Sprott Inc. (SII.TO)
- Wheaton Precious Metals Corp. (WPM.TO)
⚠ Volatility Notice: This article contains micro-cap and/or small-cap stocks (under $1B market cap). These companies tend to have lower trading volume and can experience significantly higher price volatility than large-cap stocks. Please exercise additional caution and conduct thorough due diligence before investing.
Franco-Nevada Corporation (TSX: FNV)
$323.52
Overall Grade7.1 / 10
Franco-Nevada Corporation operates as a premier royalty and streaming company, primarily focused on precious metals. Unlike traditional mining companies, Franco-Nevada does not operate mines, develop projects, or conduct exploration...
Grades
Valuation
Profitability
Growth
Debt
Dividend
Valuation
P/E27.2
P/B4.9
P/S17.3
P/FCF22.6
FCF Yield+4.4%
Growth & Outlook
Rev Growth (YoY)+73.6%
EPS Growth (YoY)+88.0%
Revenue 5yr+13.3%
EPS 5yr+16.6%
FCF 5yr+13.9%
Fundamentals
Market Cap$61.8B
Dividend Yield0.8%
Operating Margin+78.5%
ROE+19.9%
Interest Coverage695.0x
Competitive Edge
- The royalty structure caps downside in a way producers cannot copy: Franco-Nevada carries no exposure to diesel, labour or sustaining capital inflation at the mine, so when operators' all-in sustaining costs rise, the royalty margin is untouched.
- Scale is the moat. With roughly 400 assets, no single one drives results the way Cobre Panama once did, and the balance sheet lets it write cheques Sandstorm or Metalla cannot, leaving Wheaton Precious Metals and Royal Gold as the only genuine bidders on large streams.
- Optionality is free. Royalties cover the full property, so exploration success and mine life extensions funded entirely by the operator accrue to Franco-Nevada with zero incremental capital. That is why the asset base grows without the capex line moving.
- The Cobre Panama arbitration and eventual restart remains an unpriced call option rather than a carried cost, since the asset contributes nothing to current revenue. The ounces removed from the KPI tables in FY2024 are still in the ground.
- Overhead of 1.9% of revenue and SBC of 0.23% means the corporate structure barely consumes the revenue it collects. Adding assets does not add headcount, so operating leverage on the next acquisition is close to absolute.
By the Numbers
- The FY2025 jump is almost entirely precious metals: that segment's revenue rose 81.3% to $1.56B while gross profit rose 98.6% to $1.18B. Gross profit growing faster than revenue on a royalty book means the incremental gold price flows through at close to 100% margin, which is the whole point of the model.
- Revenue per share of $11.99 versus share growth of only 0.23% means the 73.6% top-line jump reached shareholders nearly intact. Most gold producers fund growth by issuing equity; Franco-Nevada funded a record year without it.
- Capex is 0.10% of revenue and 0.13% of operating cash flow. FCF conversion of 1.20x net income is not an accounting quirk, it reflects depletion charges with no matching cash outlay, so reported earnings understate the actual cash the portfolio throws off.
- Zero debt plus $1.01B net cash against roughly $2.2B EBITDA gives a net debt/EBITDA of negative 0.47x. At a point in the gold cycle when producers are flush and less desperate for capital, the firepower matters more for the next downturn than for today.
- ROIC moved from 6.4% in FY2020 to 17% in FY2025 with no leverage added. Since debt is zero, ROE of 19.9% and ROIC of 19.5% are effectively the same number, so returns are coming from the assets themselves, not from balance sheet engineering.
Risk Factors
- Strip out precious metals and the rest of the portfolio is shrinking. Other mining revenue fell 4.4% to $56.1M, iron ore GEOs dropped 43% to 12,711, oil GEOs fell 32.8% to 39,665 and PGM GEOs fell 12.5% to 10,178. Four of the diversifiers declined in the same year.
- Quarterly momentum has already turned. Precious metals revenue fell 12.2% QoQ to $498.7M and precious metals gross profit fell 26.6% QoQ to $392.8M, a gross profit decline more than twice the revenue decline. Annual data still shows a boom the latest quarter does not.
- Analyst estimates are not a straight line: EPS of $8.20 for FY2026 and $9.14 for FY2027 give way to $8.71 in the fourth estimate year, and estimated EBIT dips from $2.03B to $1.75B before recovering. The forward curve embeds a gold price fade that the trailing multiple ignores.
- The Management findings note adjusted earnings sit 49% away from the filed figure. For a company whose non-cash depletion is the single largest expense line, that gap deserves scrutiny rather than acceptance.
- P/FCF of 29.0x sits 6% above the 5-year average of 27.5x and EV/Sales of 21.8x sits above its 20.4x average, even though FY2025 revenue was inflated by a once-in-a-decade gold move. Paying a premium multiple on peak cyclical revenue is a double exposure.
Auxly Cannabis Group Inc. (TSX: XLY)
$3.35
Overall Grade7.1 / 10
Auxly Cannabis Group Inc. is a vertically integrated Canadian cannabis company that operates primarily in the adult-use recreational and wellness markets...
Grades
Valuation
Profitability
Growth
Debt
Dividend
Valuation
P/E11.7
P/B1.3
P/S1.5
P/FCF7.8
FCF Yield+12.9%
Growth & Outlook
Rev Growth (YoY)+18.8%
EPS Growth (YoY)-41.7%
Revenue 5yr+22.2%
EPS 5yr-
FCF 5yr-
Fundamentals
Market Cap$338M
Dividend Yield-
Operating Margin+19.5%
ROE+20.2%
Interest Coverage9.1x
Competitive Edge
- Auxly's edge is manufacturing depth in derivatives, not cultivation. Its Dosecann facility in PEI makes vapes, edibles and concentrates at scale, categories where Health Canada's 10mg THC edible cap and format rules create real technical barriers that flower-focused rivals like Organigram cannot quickly replicate.
- Being a top-share player in vapes matters structurally: vapes carry higher gross margin than dried flower and the excise tax is ad valorem rather than the punishing flat $1 per gram that crushes value flower economics. Product mix is a tax-arbitrage moat.
- The Imperial Brands relationship converted from a debt overhang into a strategic anchor, giving Auxly a route to international CPG expertise and formulation IP without the equity dilution that funded most peer expansion.
- Unlike Canopy or Tilray, Auxly carries zero goodwill on the balance sheet. That means today's 15.7% ROIC is measured against real invested capital, not a denominator already written down by impairments, so the returns comparison is apples to oranges in Auxly's favour.
- Provincial board relationships and shelf space in Ontario, Alberta and British Columbia are a distribution lock. Listings are slot-limited, and an incumbent with proven sell-through defends shelf position far more cheaply than a new entrant buys it.
By the Numbers
- Cash conversion is the tell here: FCF of $27.9M on net income of $28.5M (98% conversion) with capex at only 9.7% of operating cash flow. For a cannabis producer that spent 2018 to 2022 burning cash on greenhouse buildouts, this is a fundamentally different balance sheet posture.
- ROIC moved from negative 14% in FY2020 to 15.7% today while gross margin sits at 54.3%. In an industry where most licensed producers still run gross margins in the 20s to 30s after excise tax, that spread points to premium price points and low-cost co-packing, not just volume.
- Net debt of only $15.0M against EBITDA gives 0.34x leverage and interest coverage near 9x. Post the Imperial Brands debt restructuring, the interest burden that once consumed most of gross profit has effectively been removed from the P&L.
- EBITDA grew 38.7% and EBIT grew 52.5% on 18.8% revenue growth. That is roughly 2.8x operating leverage, with SG&A at 31.9% of revenue, meaning fixed-cost absorption is doing the heavy lifting rather than price.
- Days payable of 170 versus days inventory of 146 means suppliers are financing the entire inventory cycle and then some, producing a 29.9 day cash conversion cycle. That is why growth is not consuming cash despite an inventory-heavy product.
Risk Factors
- Share count grew 18.6% in one year and roughly 20% a year over five years, while buyback yield is only 0.7%. Revenue per share of $1.43 badly lags headline revenue growth, so per-share economics are far weaker than the top-line story suggests.
- SBC of $5.2M equals 23% of operating cash flow and 18% of net income. Strip that out and the 19.7% net margin is materially less impressive on a fully cash-costed basis.
- EPS fell 41.7% year over year even as EBITDA rose 38.7%. That gap is dilution plus a negative 3.9% effective tax rate, meaning current earnings are flattered by deferred tax recognition rather than operating cash taxes.
- Analyst estimates put FY2026 EPS at $0.21 versus $0.42 filed for FY2025, a halving, on a single analyst. Forward P/E of 16.7x is essentially the same as trailing 16.0x only because the share count assumption absorbs the difference.
- Every valuation multiple sits far above its own five-year average: EV/EBITDA 8.1x versus 5.9x, P/FCF 10.7x versus 3.1x, P/S 2.1x versus 0.7x. The re-rating after a 502% three-year compounded return has already priced the turnaround.
Vox Royalty Corp. (TSX: VOXR)
$6.64
Overall Grade7.0 / 10
Vox Royalty Corp. operates a capital-light business model focused on acquiring and managing mining royalties and streams...
Grades
Valuation
Profitability
Growth
Debt
Dividend
Valuation
P/E7.0
P/B2.1
P/S9.8
P/FCF11.8
FCF Yield+8.5%
Growth & Outlook
Rev Growth (YoY)+209.8%
EPS Growth (YoY)-1,967.4%
Revenue 5yr+75.9%
EPS 5yr-
FCF 5yr-
Fundamentals
Market Cap$468M
Dividend Yield1.4%
Operating Margin+49.1%
ROE+49.4%
Interest Coverage33.6x
Competitive Edge
- The royalty and streaming model means Vox collects a percentage of production or revenue without funding mine operating costs, capex, or exploration risk, insulating cash flow from cost inflation that hits actual miners.
- A portfolio of over 70 royalties spread across producing, development, and exploration assets diversifies single-mine operator risk, similar to how Franco-Nevada or Royal Gold use scale to smooth out individual project setbacks.
- Zero debt and a net cash position give Vox dry powder to keep acquiring royalties opportunistically when smaller miners need non-dilutive financing, a countercyclical advantage during gold sector capital crunches.
- Gold-weighted revenue provides a natural hedge in risk-off environments, since royalty holders benefit from rising gold prices without absorbing the higher all-in sustaining costs that compress miner margins.
By the Numbers
- Net cash position of $31.1 million against zero total debt means net debt/EBITDA sits at -1.12x, so the balance sheet can fund royalty acquisitions without dilution or leverage risk.
- ROIC improved from -88% in FY2020 to 1.7% in FY2025 (per management grading), and current ROIC of 17.5% shows the acquired royalty book is finally generating cash well above cost of capital.
- Revenue grew 25% a year from FY2022 to FY2025 and 50% in the last filed year alone, while EBIT growth accelerated to 80.6% YoY, indicating operating leverage is kicking in as royalty streams mature.
- Trades at 8.1x trailing earnings versus a deeply negative 5-year average P/E, and EV/EBITDA of 12.4x sits 52% below its 5-year average of 26.2x, a meaningful compression despite improving fundamentals.
- FCF margin of 83% and FCF yield of 7.4% reflect the capital-light royalty model: no mine operating costs, no capex burden, so nearly all gross profit converts toward cash generation.
Risk Factors
- Stock compensation ran at 27% of cash generated by the business (per management grading) and shares outstanding grew 41.6% in the past year, a scale of dilution that overwhelms the 26% buyback yield reported in shareholder returns.
- FCF-to-net-income conversion is just 0.58x, well below 1x, meaning reported net income of 144% profit margin is not translating into equivalent cash, likely inflated by non-cash gains or fair value items rather than operations.
- EPS fell 19.7% YoY even as revenue rose sharply, showing the share count growth (41.6% in one year) is diluting per-share economics faster than the underlying royalty portfolio can compound.
- Analyst estimates show FY2026 EPS of $0.37 dropping to $0.17 in FY2027 despite revenue rising from $32.7 million to $31.5 million being roughly flat, an earnings trajectory that looks lumpy and hard to underwrite with only two analysts covering EPS.
- SG&A eats 31.3% of revenue and SBC alone is 14.5% of revenue, high overhead ratios for a royalty aggregator whose entire pitch is a lean, capital-light cost structure.
Elemental Royalty Corporation (TSX: ELE)
$21.90
Overall Grade6.9 / 10
Elemental Royalty Corporation operates as a mid-tier precious and base metals royalty and streaming company. The company's business model provides investors with exposure to commodity prices and exploration upside without the direct capital costs, operational risks, or environmental liabilities associated with mine operation...
Grades
Valuation
Profitability
Growth
Debt
Dividend
Valuation
P/E141.0
P/B0.5
P/S9.6
P/FCF13.6
FCF Yield+7.4%
Growth & Outlook
Rev Growth (YoY)+167.4%
EPS Growth (YoY)-700.0%
Revenue 5yr+53.5%
EPS 5yr-
FCF 5yr+38.3%
Fundamentals
Market Cap$1.4B
Dividend Yield0.8%
Operating Margin+16.8%
ROE+0.4%
Interest Coverage49.6x
Competitive Edge
- The royalty and streaming model means Elemental captures gold price upside and exploration optionality on producing mines without funding capex or bearing environmental liabilities, a structurally higher margin position than owning the mines directly.
- Zero debt and a net cash position give management the ability to acquire royalties opportunistically during gold price pullbacks when operators need financing, the classic countercyclical playbook used by larger peers like Franco-Nevada and Royal Gold.
- Uncapped royalty structures mean cash flow scales with commodity price and mine life extensions without Elemental spending another dollar, converting exploration success at the underlying mine into pure margin.
- A 6.58x current ratio and no debt service obligations mean the company can absorb a multi-year gold price downturn without needing to raise equity under duress.
By the Numbers
- Net cash of $69.3M against zero total debt gives a net debt to EBITDA of -2.9x, meaning the balance sheet can fund acquisitions without touching equity markets.
- FCF margin of 70.6% versus gross margin of 62.6% signals almost no capex drag, capex to revenue is just 0.009%, the hallmark of a royalty model rather than an operator.
- Interest coverage of 49.6x and a 6.58x current ratio reflect a balance sheet built for opportunistic deals, not survival, unusual strength for a mining-adjacent name.
- Forward P/E of 23.3x versus trailing P/E of 340x implies the market is pricing a sharp earnings normalization, consistent with the 71.8% effective tax rate compressing this year's reported net income.
- Revenue per share growth trails raw revenue growth given shares outstanding rose 54.3% YoY, but FCF per share of $0.98 still comfortably exceeds trailing EPS of $0.06, showing cash earnings power well ahead of GAAP profit.
Risk Factors
- Shares outstanding grew 54.3% in a single year while buyback yield sits at negative 8.0%, meaning the company is issuing stock faster than any repurchase program can offset, a real dilution problem masked by per-share cash flow metrics.
- Total shareholder yield of -6.1% comes from 25% of market cap issued in new shares against a token 0.6% dividend, this is a capital raiser, not a capital returner, despite $69M of net cash sitting idle.
- SBC of $4.9M is 5.6% of revenue but 11% of operating cash flow, and ROE of 0.36% and ROIC of 0.40% are near zero, the current earnings base cannot yet justify the equity issuance pace.
- EPS fell 7x YoY even as EBITDA grew 2.29x and FCF grew 1.82x, the wide gap between cash generation and reported earnings warns that GAAP profit is being distorted by tax and non-cash items, not operations.
- EV/EBITDA of 35.8x is roughly in line with the 5-year average of 35.6x and P/FCF of 29.0x sits 11% above its 26.2x historical average, so the stock isn't cheap even after the multiple compression from the P/E collapse.
Sprott Inc. (TSX: SII)
$148.83
Overall Grade6.9 / 10
Sprott Inc. is a globally recognized alternative asset manager with a specialized focus on precious metals and critical materials investments...
Grades
Valuation
Profitability
Growth
Debt
Dividend
Valuation
P/E27.5
P/B7.4
P/S7.2
P/FCF20.7
FCF Yield+4.8%
Growth & Outlook
Rev Growth (YoY)+102.2%
EPS Growth (YoY)+128.7%
Revenue 5yr+21.7%
EPS 5yr+29.4%
FCF 5yr+29.6%
Fundamentals
Market Cap$3.8B
Dividend Yield1.5%
Operating Margin+41.6%
ROE+28.6%
Interest Coverage135.5x
Competitive Edge
- Sprott's physical bullion trusts (Physical Gold Trust, Physical Silver Trust) create a redemption and premium structure that locks in sticky AUM-based fees, a structural advantage over competitors offering paper gold exposure through futures-based ETFs.
- The critical materials and uranium exposure through Private Strategies gives Sprott a differentiated niche versus generalist asset managers like BlackRock or Franklin Resources, capturing fees in a market with few scaled specialist competitors.
- Zero stock-based compensation as a percent of revenue and a 26.8% effective tax rate reflect a management incentive structure not reliant on share dilution to reward employees, unusual for financial services.
By the Numbers
- ROIC of 38.4% against a debt-free balance sheet means every dollar of return is coming from operations, not financial leverage, which is rare in asset management where fee compression is common.
- FCF to net income conversion of 1.33x alongside capex to revenue of just 0.5% shows this is a capital-light fee business where reported earnings understate true cash generation.
- EBIT grew 95.3% while revenue grew 60% over the last filed year, showing real operating leverage as fixed costs like SG&A get spread over a bigger fee base.
- Net cash position of $190.5 million with zero total debt and interest coverage of 135.5x means there is effectively no balance sheet risk to underwrite when valuing the equity.
- Cash per share of $7.40 against tangible book value per share of $7.64 shows the tangible balance sheet is almost entirely liquid, a clean asset base for an asset manager.
Risk Factors
- P/S of 8.5x sits 25% above the 5-year average of 6.8x while EV/EBITDA at 19.0x is 13% above its 16.8x average, the widest premiums on the valuation tab despite P/E actually sitting slightly below its own history.
- Analyst estimates show FY2026 revenue of $249.2 million versus FY2025 filed revenue of $285.1 million, an implied revenue decline that clashes with the 60% growth just delivered and signals AUM-driven fee revenue is expected to normalize.
- Total shareholder yield of just 1.36% (1.34% dividend plus 0.22% buyback) is graded weak, meaning most of the return case rests on earnings growth continuing rather than capital returned today.
- Shares outstanding fell only 0.14% over the past year despite $7.5 million in buybacks, showing repurchases are barely making a dent given the $4.77 billion market cap.
- The stock sits 21% below its 52-week high with a six-month return of negative 3.7%, a momentum grade of just 5.2 that contradicts the three-year total return record of 57.9% annualized.
Wheaton Precious Metals Corp. (TSX: WPM)
$171.58
Overall Grade6.9 / 10
Founded in 2004 as Silver Wheaton, Wheaton Precious Metals pioneered the precious metals streaming business model. The company does not operate mines itself; instead, it partners with major mining firms like Vale, Glencore, and Newmont to purchase by-product metals from their operations...
Grades
Valuation
Profitability
Growth
Debt
Dividend
Valuation
P/E24.9
P/B5.3
P/S16.1
P/FCF20.0
FCF Yield+5.0%
Growth & Outlook
Rev Growth (YoY)+90.8%
EPS Growth (YoY)+159.7%
Revenue 5yr+20.5%
EPS 5yr+26.2%
FCF 5yr+23.6%
Fundamentals
Market Cap$76.8B
Dividend Yield0.6%
Operating Margin+72.6%
ROE+23.5%
Interest Coverage75.0x
Competitive Edge
- The streaming model means Wheaton fixes cash costs per ounce for the life of each contract while realized prices float with the market, so the 46% jump in realized gold price to $3,494/oz drops almost straight to gross margin.
- Zero operating cost exposure to mine-level inflation, labor disputes, or strip ratio changes at Salobo or Peñasquito insulates Wheaton from the capex overruns and cost inflation that have hit operators like Newmont and Barrick directly.
- Contracts with Vale and Glencore lock in decades of low-cost by-product supply, giving Wheaton reserve life exposure without the exploration or development capital risk borne by the mine operators themselves.
By the Numbers
- Silver revenue surged 82.7% YoY to $836.7 million while gold jumped 80.4% to $1.44 billion, both accelerating from FY2024 rates of 35.2% and 23.6%, showing the streaming model captures pricing upside without cost inflation.
- Net debt to EBITDA sits at just 0.71x with interest coverage at 75x, meaning debt service is a rounding error and the balance sheet can absorb another large streaming acquisition without straining the capital structure.
- ROIC climbed from 8.8% in FY2020 to 20.7% currently, and this is happening alongside revenue growth of 30% a year, evidence the moat is widening rather than aging as the portfolio matures.
- FCF payout ratio of just 12.6% versus a 15.6% earnings payout ratio leaves substantial room to raise the dividend or fund new stream acquisitions without touching the balance sheet.
- Cobalt gross margin flipped from a negative $110.1 million in FY2024 to positive $10.5 million in FY2025, removing a segment that had been a drag on consolidated profitability for three straight years.
Risk Factors
- Current ratio of 0.47x looks distressed on paper, but this is a function of royalty/streaming balance sheet structure with minimal current liabilities financing needs rather than a genuine liquidity problem.
- Palladium revenue fell 38% YoY and sold volumes dropped 45.8%, with the QoQ figure showing a further 39.8% decline, a segment that is shrinking into irrelevance as auto platinum group metal demand shifts.
- P/S of 22.1x sits 4% above the 5-year average of 21.3x even as P/E (34.3x vs 36.3x) and EV/EBITDA (27.1x vs 28.7x) both trade below their historical averages, an inconsistent valuation signal across multiples.
- PEG ratio of 5.16 flags that even after the 2025 growth surge, the market is pricing in a deceleration, consistent with FY2026 analyst EBIT estimates of $2.31 billion actually falling below the FY2027 estimate of $1.80 billion.
- SBC ran $25.3 million against $2.31 billion trailing revenue, immaterial in dollars but still a permanent share count creep with buyback yield essentially at zero, so dilution isn't being offset by repurchases.
