Sprott (TSX:SII): Evaluating Valuation After ETF Surpasses $100 Million in Gold and Silver Miner Assets

Sprott (TSX:SII) recently announced that its actively managed ETF focused on gold and silver miners reached $100 million in assets under management. This milestone reflects increasing investor confidence amid precious metals market enthusiasm.

See our latest analysis for Sprott.

Sprott’s recent fund milestone comes during a stretch of heightened enthusiasm for precious metals, as surging silver prices and a persistent supply-demand gap have kept investors watching closely. While Sprott's latest share price sits at $117.38, its one-year total shareholder return stands at nearly 1%, with momentum modest but steady over the medium and long term. Recent developments suggest the company is positioned to benefit if enthusiasm around gold and silver stocks continues.

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Sprott’s strong long-term performance and recent ETF success raise an important question: is the stock currently undervalued and offering a buying opportunity, or has the market already priced in all of its future growth?

Price-to-Earnings of 43.6x: Is it justified?

Sprott’s last close of CA$117.38 places it at a significant premium when judged by its price-to-earnings (P/E) ratio, far above both the industry and peer group averages. This makes Sprott appear expensive compared to its key competitors.

The price-to-earnings ratio indicates how much investors are willing to pay today for each dollar of current earnings. For Sprott, the P/E ratio sits at 43.6x, which is especially striking in the capital markets sector, where lower ratios are more common due to steadier profit profiles and slower growth compared to sectors such as technology. This valuation suggests the market is expecting future earnings growth and continuing investor demand for Sprott’s specialized funds.

Looking at a broader perspective, Sprott’s P/E is more than four times the Canadian Capital Markets industry average of 10.3x, and also well above the peer average of 16.6x. Such a steep premium can be difficult to justify unless the company delivers exceptional and sustained profit expansion well beyond its competitors.

See what the numbers say about this price — find out in our valuation breakdown.

Result: Price-to-Earnings of 43.6x (OVERVALUED)

However, Sprott’s premium valuation faces risks if gold and silver momentum fades or if analyst price targets turn out to be more accurate than recent market optimism.

Find out about the key risks to this Sprott narrative.

Another View: What Does the DCF Model Say?

Looking from a different angle, our DCF model suggests that Sprott's shares, currently at CA$117.38, may be even further above a reasonable valuation. The estimated fair value is CA$38. This indicates that the market may be assigning a premium well beyond traditional growth assumptions. Does this mean Sprott is overpriced, or does the market see something the models do not?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Sprott for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Sprott Narrative

If you have a different take on Sprott’s story or want to base your view on your own research, you can easily assemble your own assessment in just a few minutes, and Do it your way

A good starting point is our analysis highlighting 2 key rewards investors are optimistic about regarding Sprott.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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