PHYS

We rate Sprott Physical Gold Trust (PHYS) as a Buy with a composite score of 67.0/100 at a current price of $39.41. The stock scores above average across the majority of our six quantitative factors and ranks #191 out of 7,333 stocks in our universe, reflecting a favorable risk-reward profile.

The rating is primarily driven by strength in momentum (91th percentile) and value (82th percentile), which together account for the majority of the composite score. Offsetting weakness in investment (30th percentile) and quality (64th percentile) tempers our overall conviction. We assign a Narrow Moat rating (57/100), Low uncertainty, and Exemplary capital allocation.

Key items to watch: sustainability of the current growth rate. Any material change in these dynamics could warrant a reassessment of our rating. The moat trend is stable, which suggests the competitive landscape is stable for now.

Sprott Physical Gold Trust holds a top-quartile position (#8 of 50) within the Finance, Insurance, And Real Estate sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 67.0/100 places it at rank #191 in our full 7,333-stock universe. At $8.4B in market capitalization, Sprott Physical Gold Trust is a mid-cap player in the Finance, Insurance, And Real Estate space, which limits certain scale advantages but may allow for more agile strategic execution.

The near-term outlook is constructive, with revenue growing at 139% and momentum in the 91th percentile confirming positive market sentiment and institutional accumulation. The combination of strong top-line growth and favorable price dynamics suggests the company is executing well on its growth strategy. Investment factor at the 30th percentile indicates reinvestment patterns that investors should monitor for sustainability.

The margin cascade tells an important story: gross margins of 102% (+25.3pp vs sector) narrow to operating margins of 100% (+83.0pp vs sector) and net margins of 100.0%, yielding a gross-to-net conversion rate of 98%. This efficient conversion suggests well-controlled operating costs and limited margin leakage between the gross and net levels.

At a current price of $39.41, Sprott Physical Gold Trust appears undervalued relative to its fundamentals. Our value factor score of 82/100 reflects a composite assessment across multiple valuation metrics including price-to-earnings, price-to-book, EV/EBITDA, and price-to-sales ratios relative to both sector peers and the broader market. The stock screens as attractively priced on a majority of these measures, suggesting the market may be underappreciating the underlying fundamentals.

The stock currently trades at EV/EBITDA of 2.7x (discounted to peers), P/B of 2.1x, P/S of 2.7x. We evaluate these multiples in the context of both absolute levels and sector-relative positioning to form our valuation view.

We assign a Low uncertainty rating to Sprott Physical Gold Trust. The company exhibits strong financial stability with a beta of 0.03, conservative leverage (0% D/E), and a stability factor in the 66th percentile. The predictable nature of the business model and solid financial position reduce the range of potential outcomes, giving us confidence in our fair value estimate.

Specific risk factors that inform our assessment include: low beta of 0.03 — while defensive, this may indicate limited upside participation in bull markets. Each of these factors independently widens the distribution of potential outcomes, and in combination they create a risk profile that demands careful position sizing. The stability factor at the 66th percentile and quality factor at the 64th percentile provide a quantitative summary of the overall risk landscape.

Key risk mitigants include: healthy gross margins of 102% provide a buffer against cost pressures; conservative leverage (0% D/E) limits balance sheet risk; above-average stability (66th percentile) suggests predictable business dynamics. These factors partially offset the identified risks and provide downside protection in adverse scenarios. On balance, the risk-reward profile is favorable for long-term investors.

We rate Sprott Physical Gold Trust's capital allocation as Exemplary. Management demonstrates a strong track record of balancing reinvestment with shareholder returns, evidenced by returns on equity of 79.2%, disciplined leverage (0% D/E), best-in-class net margins of 100.0%. Exemplary allocators typically generate returns on equity above 20% while maintaining debt-to-equity below 50% — Sprott Physical Gold Trust meets this high bar.

The balance sheet remains conservatively managed, providing financial flexibility for opportunistic investments while maintaining a margin of safety for shareholders. We note that the combination of 80.3% return on assets and controlled leverage suggests management is deploying capital at rates well above the cost of capital — the hallmark of exemplary stewardship.

In summary, Sprott Physical Gold Trust receives a Buy rating with a composite score of 67.0/100 (rank #191 of 7,333). Our quantitative framework assigns a Narrow Moat (57/100, trend: stable), Low uncertainty, and Exemplary capital allocation. The average factor score across quality, value, momentum, stability, and investment is 67/100.

Our analysis supports a constructive view on Sprott Physical Gold Trust. The combination of identifiable competitive advantages, low uncertainty, and exemplary capital allocation creates a risk-reward profile that favors accumulation at current levels. We recommend investors consider adding this name to portfolios aligned with the stock's risk profile.