Gold investors are in for a wildly good year in 2025. With gold prices surging 27% year-to-date, Canadian gold stocks have been a richly rewarding trade so far this year. Even better, if you’re looking for a way to invest in gold without taking on the risks that come with digging it out of the ground, Franco-Nevada (TSX: FNV) stock has likely crossed your radar. As a gold-focused royalty and streaming company, it offers a unique proposition: exposure to gold prices and mineral exploration upside, without operational headaches or ballooning capital costs. But after a strong 44% rally in 2025, does this top TSX gold stock still deserve a spot in your portfolio?
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Franco-Nevada stock: A low-risk play on gold’s upside
At its core, Franco-Nevada’s business is elegantly simple. It provides upfront funding to mining companies in exchange for the right to buy metals at a fixed cost or receive a percentage of future revenue from a mine. This model generates staggering margins. In 2024, the company reported an adjusted net income margin of 56%. This high-margin, low-cost profile insulates it from the inflation that often plagues traditional miners. Think of it as a toll booth on gold production; Franco-Nevada collects a fee for every ounce that passes through, regardless of how expensive (or cheap) it was to mine.
Since its initial public offering (IPO) nearly three decades ago, Franco-Nevada stock has delivered a compounded annual return of 16%. It has increased its dividend for 18 consecutive years, a testament to its powerful and sustainable cash flow generation. Current performance is built on a foundation of 432 assets, 120 of them already cash flow generating, with 39 in advanced construction stages.
Franco-Nevada’s recent record-setting second-quarter results underscored its business strength. Revenue surged 42% year-over-year to US$369.4 million, even as Gold Equivalent Ounces (GEOs, a key metric that combines revenue from all commodities into equivalent ounces of gold) sold grew a more modest 2%. Its leverage to record-high gold prices is a central part of the investment thesis in 2025.
However, the biggest question for investors today is on its rich valuation.
FNV stock is expensive – for good reasons
The gold-royalties stock trades at a historical price-to-earnings (P/E) ratio of 43, which is significantly higher than the industry average of 23.8. You are paying a premium for quality. This premium is justifiable given a proven low-risk business model, pristine balance sheet with no long-term debt, and best-in-class management team with a sharp eye for value-accretive deals.
The real excitement, however, lies in the near future. Franco-Nevada’s growth pipeline is robust, with management guiding toward 40% revenue growth in 2025. Recent strategic acquisitions are fueling this outlook. The company made a major move by acquiring a royalty on the Arthur Gold Project in Nevada, a potentially tier-one asset with a rapidly expanding resource base. It also added a royalty on the new Côté Gold mine in Ontario (operated by IAMGOLD), which immediately contributes cash flow. Furthermore, its five-year outlook points to GEOs potentially reaching 490,000 to 550,000, up from 463,000 in 2024. A significant portion of this growth is already under construction, de-risking the forecast.
And then there’s the valuable optionality – the potential for unexpected upside. The company’s portfolio includes 273 exploration-stage assets. A single discovery on one of these properties could be transformative, much like past wins where a $2 million investment in the Goldstrike royalty grew into over $1 billion in returns.
There’s also the potential restart of the Cobre Panama mine, which, while fully impaired on the books, could eventually add 130,000 to 150,000 GEOs annually if resolved.
Is Franco-Nevada stock a buy right now?
So, is Franco-Nevada a buy? For investors seeking a low-risk hedge against market volatility and a pure play on sustained strong gold prices, the answer is a cautious yes. The premium valuation demands respect and suggests it may be more suitable for gradual accumulation on market pullbacks rather than a single large purchase today. There could be some undervalued options with better upside potential on the market today. But for long-term-oriented investors, Franco-Nevada stock represents a unique and high-quality way to hold gold in your portfolio, offering some growing dividends and a share in the ground’s hidden treasures without ever having to operate a single mine.
