Can Pan American Silver’s 94% Rally in 2025 Still Be Justified?

• Wondering if Pan American Silver is a buy, a hold, or just overhyped? You are not alone, especially with recent excitement around its value and growth prospects.
• The stock has soared this year, up a remarkable 94.2% year-to-date and nearly doubling over the past 12 months, with especially strong gains in the last 30 days.
• Driving these moves is a renewed spotlight on precious metals as economic uncertainty rises. There is also news of increased silver demand from both industrial use and central banks boosting their holdings. Headlines about tighter global silver supplies have contributed to optimism for further upside.
• When it comes to valuation, Pan American Silver currently earns a score of 3 out of 6 on our value checklist, suggesting some strengths but room for caution. In a moment, we will break down each approach to valuing the shares and explore a smarter, more holistic way to judge whether the stock fits your investment goals.

Pan American Silver delivered 99.7% returns over the last year. See how this stacks up to the rest of the Metals and Mining industry.

Approach 1: Pan American Silver Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model is a common method for valuing a company by projecting future cash flows and discounting them back to their present value. For Pan American Silver, this approach uses estimates of future Free Cash Flow (FCF), which measures how much actual cash the business generates after running its operations and maintaining its assets.

Currently, Pan American Silver reports a trailing twelve-month FCF of $644 Million. According to analyst estimates and forward projections, this figure is expected to grow, reaching approximately $1.86 Billion by 2028. Further projections extending out a decade suggest continued positive momentum in cash generation. However, estimates beyond five years become less certain and are modeled by Simply Wall St using extrapolation techniques.

The DCF model calculates an intrinsic value per share of $146.37. This implies a substantial discount compared to the current share price. Specifically, Pan American Silver appears to be trading at about a 59.1% discount to its estimated intrinsic value, making it stand out as undervalued using this approach.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Pan American Silver is undervalued by 59.1%. Track this in your watchlist or portfolio, or discover 927 more undervalued stocks based on cash flows.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Pan American Silver.

Approach 2: Pan American Silver Price vs Earnings

The Price-to-Earnings (PE) ratio is a widely used valuation tool, especially for companies that are consistently profitable like Pan American Silver. It helps investors gauge whether a company's current share price reflects its earnings potential, making it a useful measure for those focused on earnings-driven businesses.

It's important to remember that what counts as a “normal” or “fair” PE ratio varies based on growth expectations and risk. Companies with higher growth prospects or lower perceived risks generally command higher PE ratios, while slower-growing or riskier firms typically have lower ones.

Currently, Pan American Silver trades at a PE ratio of 28.3x. For context, the industry average for Metals and Mining is 19.6x and the average among direct peers stands at 62.8x. These benchmarks offer helpful perspective, but not the complete picture.

Simply Wall St’s proprietary Fair Ratio for Pan American Silver is 28.1x. The Fair Ratio goes beyond simple comparisons by considering factors like the company’s earnings growth, industry, profit margin, market capitalization, and specific risks. This makes it a more holistic and accurate yardstick than the typical peer or industry average.

Comparing the Fair Ratio (28.1x) to the current PE (28.3x) suggests that Pan American Silver’s shares are priced about right relative to the company’s fundamentals.

Result: ABOUT RIGHT

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1433 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Pan American Silver Narrative

Earlier we mentioned that there is an even better way to understand valuation. Let's introduce you to Narratives. A Narrative is a simple yet powerful tool that lets you define your own story, your unique perspective, behind a company's numbers by expressing your view on its fair value, future revenue, earnings, and margins.

Narratives tie together a company's story, a financial forecast, and an end fair value. This makes it much easier to see how your views connect to the data. They are available on Simply Wall St's Community page, used by millions, and allow you to easily compare your stance with others in just a few clicks.

When you use Narratives, you can see if Pan American Silver aligns with your investment perspective by checking how your Fair Value compares to the current market price. Narratives are refreshed whenever new updates or news are released, keeping your insights up to date.

For example, one investor’s Narrative for Pan American Silver may predict a much higher fair value if they expect robust silver demand. Another might see it as overvalued due to anticipated market headwinds; both perspectives are visible and comparable on the platform.

Do you think there's more to the story for Pan American Silver? Head over to our Community to see what others are saying!

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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