Has the 100% Rally Left Pan American Silver Fully Priced or Is Value Still Ahead?

• Wondering if Pan American Silver is still a bargain after its big run, or if you have already missed the upside? This breakdown will help you separate genuine value from hype.
• The stock has surged recently, climbing 3.9% over the last week, 31.8% over the last month, and an eye catching 100.2% year to date, with a 96.2% gain over the past year capping a multi year rally of 190.6% over three years and 77.5% over five years.
• These moves have come as investors refocus on silver and gold miners amid shifting inflation expectations and renewed interest in safe haven assets, with Pan American often highlighted for its scale and asset base in Latin America. On top of that, sector wide optimism around precious metals and ongoing consolidation chatter among miners have added fuel to the recent momentum.
• Despite that run, Pan American Silver scores a 3/6 valuation check score. This suggests the market may not be fully pricing in its fundamentals yet, or might be getting ahead of itself in some areas. Next we will walk through the main valuation approaches investors are using on the stock, before finishing with a more nuanced way to think about what Pan American is really worth.

Find out why Pan American Silver's 96.2% return over the last year is lagging behind its peers.

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

The Discounted Cash Flow model estimates what a business is worth by projecting its future cash flows and then discounting those cash flows back to today, using a required rate of return. For Pan American Silver, the model used is a 2 Stage Free Cash Flow to Equity approach, which factors in a higher near term growth phase followed by a more mature phase.

The company generated about $644.0 Million of free cash flow over the last twelve months, and analyst forecasts, combined with extrapolations by Simply Wall St, see this rising steadily over the coming decade. By 2028, free cash flow is projected to reach roughly $1.86 Billion, and by 2035 the extended projections climb further to around $2.55 Billion, all in $ terms.

After discounting these future cash flows, the DCF model arrives at an estimated intrinsic value of about $144.16 per share. This implies the stock is trading at roughly a 57.2% discount to its estimated fair value, indicating it appears significantly undervalued on a cash flow basis.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Pan American Silver is undervalued by 57.2%. Track this in your watchlist or portfolio, or discover 912 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

For profitable companies like Pan American Silver, the price to earnings ratio is a straightforward way to see how much investors are willing to pay for each dollar of current earnings. Higher growth and lower perceived risk usually justify a higher PE ratio, while slower growth or higher uncertainty tend to pull a fair PE lower.

Pan American currently trades on a PE of about 29.4x. That is above the broader Metals and Mining industry average of roughly 21.2x but well below the 63.6x average of its closest peers. This suggests the market is optimistic, but not euphoric, about its earnings outlook. To sharpen this view, Simply Wall St calculates a proprietary Fair Ratio for each company. This metric estimates what PE you would reasonably expect based on its earnings growth profile, risk factors, profit margins, industry positioning and market capitalization.

For Pan American, the Fair Ratio comes out at around 26.0x, meaning the stock is trading modestly above what those fundamentals alone would imply. On this lens, the shares look slightly expensive rather than obviously cheap.

Result: OVERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1442 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, so let us introduce you to Narratives, which sit on Simply Wall St's Community page and are used by millions of investors. A Narrative is a clear, written story that explains your view of a company, and then ties that story directly to your numbers, such as your assumed fair value, and your estimates for future revenue, earnings and profit margins. In practice, a Narrative links three things together: the business story, a financial forecast based on that story, and the fair value that falls out of those forecasts. This makes it far easier to see whether the current share price looks attractive or stretched. Because Narratives on Simply Wall St are dynamic, they update as fresh data arrives, like new earnings or major news, so your fair value view stays current without you rebuilding a model from scratch. Investors can then compare their Narrative fair value for Pan American Silver to the live market price to guide buy, hold or sell decisions, and those views can vary widely, for example from a very cautious scenario with weak silver prices and limited growth, to a very optimistic one that assumes stronger metals prices, rising production and improving margins.

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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