Sandstorm Gold’s market capitalisation broke $1 billion last week as the company’s stock price has been rocketing since early september. The company’s stock price has nearly tripled since it’s 52 week low of $5.32, reaching $14.99 on October 5th.

Sandstorm Gold is a gold streaming company, meaning they seek to provide financing to mining projects in exchange for a share of gold production delivered at a pre-determined and constant rate. Although this business model presents significant risks, such as investing in a project that may produce very little or no gold, it also presenst significant advantages: gold streaming has the potential to reap extraordinary revenues. For example, when Sandstorm Gold invests in a successful mining project, they are able to buy gold for a set rate of $450/oz (for example) and re-sell it on the global market for $1775/oz.

And yes, investors agree with you; this does sound like an effective method to generate profits! This is why the company’s stock has risen nearly 50% in the last month.

However, the quesiton is: is it too late to buy Sandstorm Gold’s stock?

Currently, the company is trading at 62.28 times earnings, which is significantly higher than companies with similar business models like Silver Wheaton Corp. (SLW), Goldcorp Inc. (GG), and Barrick Gold Corporation who have respective P/Es of 24.85, 28.12, and 10.10.

On the up-side, Sandstorm’s high P/E ratio and market capitalisation of $1 billion dollars signifies that they have the capital they need to invest more in potentially fruitful projects, thus bringing-in more earnings for investors. On the down-side, one must decide whether $14.35 a share at 62.28 P/E is a good deal; maybe Sandstorm Gold’s stock is overpriced and its growth prospects are limited.

Is it possible for Sandstorm gold to reach 18$ or $20 a share in the future? At current earnings levels, this would signify a stock price of around 80 times earnings, which seems expensive to say the least. In the long run, however, Sandstorm Gold’s stock growth will ultimately depend on how they generate profits with their new soaring market capitalization. If Nolan Watson can increase earnings by continuing to shake hands on sound mining projects, he will help drive down the P/E ratio which will make Sandstorm gold seem like a more affordable investment.