Assessing Pan American Silver (TSX:PAAS) Valuation Following Recent Production Gains and Sector Momentum

Pan American Silver (TSX:PAAS) has seen its shares climb in recent months, due to improved production and favorable market trends that have benefited the broader mining industry.

See our latest analysis for Pan American Silver.

Pan American Silver’s 15% share price return over the past week and nearly 21% gain in the past month signal powerful momentum is building, supported by industry tailwinds and continued solid operational execution. Its impressive 93% year-to-date price jump has also lifted the 1-year total shareholder return to 96%, showing that both recent and long-term investors have seen substantial gains.

If the strength in metals stocks piques your interest, this could be the perfect moment to widen your search and explore fast growing stocks with high insider ownership.

With such sharp price appreciation and robust performance, the question facing investors now is whether Pan American Silver remains undervalued with room to run, or if the market is already pricing in future growth potential.

Price-to-Earnings of 28.2x: Is it justified?

Pan American Silver is currently trading at a price-to-earnings ratio of 28.2x, which reflects how much investors are willing to pay for each dollar of current earnings.

The price-to-earnings ratio (P/E) is a key measure that assesses how a stock is valued relative to its underlying earnings. For a mining company like Pan American Silver, it signals the market’s confidence in cash flow, future profitability, and the strength of commodity prices.

At 28.2x, Pan American Silver’s P/E compares favorably to its peer average of 63.2x, suggesting the stock is priced lower than other metals and mining companies based on this key metric. However, it is notably higher than the broader Canadian metals and mining industry average of 19.3x, so investors are paying a premium for earnings relative to the industry overall. Compared to the estimated Fair Price-to-Earnings Ratio of 28.3x, the current valuation appears to be in line with expectations, indicating limited disconnect between price and earnings potential.

Explore the SWS fair ratio for Pan American Silver

Result: Price-to-Earnings of 28.2x (ABOUT RIGHT)

However, fluctuating metal prices and operational challenges across its global mines could quickly alter the outlook for Pan American Silver’s continued momentum.

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

Another View: DCF Model Tells a Different Story

While the price-to-earnings ratio suggests Pan American Silver is fairly valued, our DCF model presents a contrasting perspective. According to this approach, the shares are trading at a significant 59.5% discount to estimated fair value. This may indicate the market is overlooking longer-term cash flow potential.

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 Pan American Silver 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 922 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 Pan American Silver Narrative

If you have a different perspective or want to dive deeper into the numbers yourself, you can build your own case using all the data presented. 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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