Pan American Silver (TSX:PAAS): Assessing Valuation After Recent 24% Share Price Surge

Pan American Silver (TSX:PAAS) shares have seen some movement lately, and investors are keeping an eye on recent performance trends. Over the past three months, the stock is up nearly 24%, which offers some perspective on its current momentum.

See our latest analysis for Pan American Silver.

Momentum around Pan American Silver is definitely building. Not only has the share price jumped over 23% in the past three months, but the total shareholder return over the last year stands at an impressive 81%. Put simply, both recent gains and long-term performance suggest optimism is running high for this miner.

If silver’s rally has you thinking bigger, now’s the moment to broaden your search and discover fast growing stocks with high insider ownership

With the stock’s impressive run, investors are now asking whether Pan American Silver is still trading below its true value or if the market has already factored in all the future growth potential. Is there still a buying opportunity?

Price-to-Earnings of 31x: Is it justified?

Pan American Silver’s current price-to-earnings (P/E) ratio sits at 31x, which is less than half the peer average of 66.1x. This signals that it is trading at a noticeable discount to companies in its group. At the last close of CA$53.74, this lower multiple draws attention for both value-seekers and growth-focused investors looking for an entry point in the mining sector.

The price-to-earnings ratio is a key benchmark for miners, showing how much investors are willing to pay for each dollar of profit. In this case, the 31x P/E reflects what investors expect from Pan American Silver’s future profits and how the market is weighing its recent turnaround into profitability.

This multiple is markedly below the peer average, highlighting that the market has not bid up PAAS to the levels seen elsewhere in the sector. However, compared to the Canadian Metals and Mining industry average of 22.7x, PAAS is still trading at a premium. This suggests that investors are pricing in superior earnings potential or safety relative to many of its local competitors. Notably, this P/E is also above the estimated fair price-to-earnings ratio of 28.7x, suggesting there is room for a reversion should market views change.

Explore the SWS fair ratio for Pan American Silver

Result: Price-to-Earnings of 31x (ABOUT RIGHT)

However, a reversal in silver prices or operational challenges could quickly dampen Pan American Silver’s strong momentum and change its valuation outlook.

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

Another View: What Does the SWS DCF Model Reveal?

Taking a step back from multiples, our DCF model also shows Pan American Silver trading at a discount. Currently, the share price is about 15% below our DCF-estimated fair value of CA$63.61, suggesting the stock might still have room to run. However, market expectations could change as conditions evolve.

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 883 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 see things differently or want the story in your own words, you can quickly shape your own view using the latest data. This can all be done 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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