With a significant daily gain of 4.54% and a notable three-month gain of 66.01%, Pan American Silver Corp (PAAS, Financial) presents an interesting case for investors. However, with a Loss Per Share of 0.42, the question arises: is the stock modestly overvalued? This analysis delves into the valuation of Pan American Silver, encouraging readers to explore the intricate details of its market assessment.
Company Overview
Pan American Silver Corp is primarily involved in the mining and development of silver and gold properties. It operates several mines including La Colorada, Dolores, and Timmins West, among others. The company also engages in the production and sale of zinc, lead, and copper. Currently, the stock's price stands at $21.54, against a GF Value (fair intrinsic value) of $17.24, suggesting that the stock might be modestly overvalued.
Understanding GF Value
The GF Value is a proprietary measure calculated based on historical trading multiples, a GuruFocus adjustment factor, and future business performance estimates. For Pan American Silver, the GF Value suggests that the stock should ideally trade at $17.24. Trading above this value at $21.54, the stock appears modestly overvalued, which might lead to poorer future returns compared to its business growth.
Financial Strength and Stability
Pan American Silver's financial strength is critical to assess its risk of capital loss. The company has a cash-to-debt ratio of 0.41, which is lower than 76.79% of its peers in the Metals & Mining industry. This ratio, along with its fair overall financial strength rating of 6 out of 10, suggests that Pan American Silver has a moderate risk profile.
Profitability and Growth Prospects
Investing in profitable companies usually poses less risk. Pan American Silver has demonstrated fair profitability with an operating margin of 2.23%, ranking better than 51.93% of its industry peers. However, its growth metrics, including a 3-year average revenue growth rate worse than 62.75% of its competitors, signal potential challenges ahead.
Moreover, when comparing Return on Invested Capital (ROIC) to the Weighted Average Cost of Capital (WACC), Pan American Silver's figures of 1.52 and 9.43, respectively, indicate that it is not creating value over its capital cost. This is a crucial insight for potential investors.
Conclusion
In summary, Pan American Silver (PAAS, Financial) appears modestly overvalued based on its current market price and GF Value. The company maintains fair financial health and profitability but faces growth challenges. Investors should consider these factors carefully. For a deeper understanding of Pan American Silver's financials over the past 30 years, visit the company's financial overview on GuruFocus.
To explore other high-quality companies that may offer above-average returns, check out the GuruFocus High Quality Low Capex Screener.
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
