Is First Majestic Silver Corp (TSE:FR) Undervalued After Accounting For Its Future Growth?

First Majestic Silver Corp (TSX:FR) is considered a high growth stock, but some investors are starting to doubt its last closing price of CA$9.72 can be still justified by the high growth potential. When questioning the value of a company's share price, I have a few metrics I check. Let's see how FR stacks up against those measures. See our latest analysis for First Majestic Silver

What are the future expectations?

One reason why investors are attracted to FR is the high growth potential in the near future. Expectations from 6 analysts are high, with earnings per share forecasted to rise significantly from todays level of $0.028 to more than double over the next couple of years.

Is FR's share price justifiable by its earnings growth?

First Majestic Silver is available at price-to-earnings ratio of 269.48x, showing us it is overvalued based on current earnings compared to the metals and mining industry average of 11.62x , and overvalued compared to the CA market average ratio of 16.83x .

We understand FR seems to be overvalued based on its current earnings, compared to its industry peers. But, to be able to properly assess the value of a high-growth stock such as First Majestic Silver, we must incorporate its earnings growth in our valuation. The PEG ratio is a great calculation to take account of growth in the stock's valuation. Based on First Majestic Silver's predicted 751.47% growth in earnings next year and PE ratio of 269.48x we see that First Majestic Silver has a quite high PEG ratio of 4.15x. Based on that First Majestic Silver's stock can be considered overvalued , based on the fundamentals.

What this means for you:

Are you a shareholder? You may have already conducted fundamental analysis on the stock as a shareholder, so its current overvaluation could signal a potential selling opportunity to reduce your exposure to FR. Although, you should never overlook what intrinsic valuation models are telling you either. Take a look at what valuation our discounted cash flow model is yielding.

Are you a potential investor? If you are considering investing in FR, looking at the PEG ratio on its own is not enough to make a well-informed decision. You will benefit from looking at additional analysis and considering its intrinsic valuation along with other relative valuation metrics like P/E and EV/Sales. Click here to for a more in-depth analysis on these metrics.

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Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article 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.