A Look at Pan American Silver (TSX:PAAS) Valuation Following New High-Grade Silver Discoveries at La Colorada

If you are following Pan American Silver (TSX:PAAS), you have likely noticed the buzz around its latest exploration results at the La Colorada mine. The company just revealed that new high-grade silver zones have been uncovered, thanks to an ambitious drilling program spanning 65,000 meters. Alongside new discoveries, Pan American Silver's updated mineral reserves and resources report as of June 2025 highlights a solid foundation of silver and gold. These are key signals that the company is extending its asset base and potentially improving its economics.

These developments come after a year in which Pan American Silver's share price has surged, rising nearly 79% over the past 12 months. In August alone, the stock gained 24.9%, buoyed by both these resource updates and rising metal prices. The company’s acquisition of a large stake in the Juanicipio mine earlier this year added another layer of transformation, enhancing future production outlook even as day-to-day momentum builds for the stock. All this has kept Pan American Silver firmly in the spotlight for both growth-focused and value-minded investors.

So, after such a rapid rally and a wave of positive company news, is Pan American Silver offering up a real buying opportunity, or has the market already priced in all of this future growth?

Price-to-Earnings of 29.6x: Is it justified?

Pan American Silver currently trades at a price-to-earnings (P/E) ratio of 29.6x, which is higher than both its estimated fair P/E ratio of 25.6x and the Canadian Metals and Mining industry average of 18.6x. This indicates that the market has a relatively optimistic outlook for the company’s future earnings potential compared to industry peers.

The P/E ratio measures how much investors are willing to pay for a dollar of the company’s earnings, serving as a gauge of expectations for future growth and profitability. In capital-intensive sectors like metals and mining, a high P/E can reflect anticipation of elevated earnings growth. It may also mean investors are paying a premium for perceived quality or future expansion.

Given Pan American Silver’s P/E is well above the industry norm and even its own fair value estimate, the market appears to be pricing in robust growth and operational improvements ahead. However, this premium may not be fully justified if the company’s actual performance does not meet these high expectations.

Result: Fair Value of CA$139.39 (UNDERVALUED)

See our latest analysis for Pan American Silver.

However, investors should keep in mind that volatile silver prices and potential delays in project development could quickly shift expectations and change the optimistic outlook.

Find out about the key risks to this Pan American Silver narrative.

Another View: What Our DCF Model Suggests

While the market valuation may appear steep based on traditional earnings metrics, our DCF model tells a different story. This approach suggests the company may actually be trading well below its true value. Could the market be overlooking something?

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

Stay updated when valuation signals shift by adding Pan American Silver to your watchlist or portfolio. Alternatively, explore our screener to discover other companies that fit your criteria.

Build Your Own Pan American Silver Narrative

If you see the numbers differently or want to investigate the data yourself, you have the tools to put together your own narrative in just a few minutes. Do it your way

A great starting point for your Pan American Silver research is our analysis highlighting 3 key rewards and 2 important warning signs that could impact your investment decision.

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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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