Pan American Silver (TSX:PAAS): Assessing Valuation Following Strong Earnings and Double-Digit Share Price Growth

Pan American Silver (TSX:PAAS) has delivered year-over-year revenue growth of 11% and net income growth of 29%. This has prompted investors to take a closer look at its performance over the past year and consider what might be ahead.

See our latest analysis for Pan American Silver.

Pan American Silver’s momentum has turned heads this year, with the share price climbing nearly 67% year-to-date as investors respond to stronger earnings and an improved outlook. Over the past year, the company’s total shareholder return reached 62.7%, highlighting both recent and sustained confidence.

If Pan American’s results have you rethinking what’s possible in today’s market, now is an ideal time to broaden your search and discover fast growing stocks with high insider ownership.

Yet with shares up so strongly and analysts projecting nearly 30% more upside, the real question is whether Pan American Silver remains undervalued, or if the market has fully factored in its expected growth.

Price-to-Earnings of 24.3x: Is it justified?

Pan American Silver is trading at a price-to-earnings (P/E) ratio of 24.3x, placing it in a favorable light when compared to both its peer group and the calculated fair P/E value. At the last close of CA$51.43, the stock appears attractively priced on this basis.

The P/E ratio reflects how much investors are willing to pay for each dollar of earnings. For Pan American Silver, this means the market sees solid value or has strong confidence in the company’s future profit growth. In sectors with high commodity price swings, a justifiable P/E often signals expected improvements in earnings power or stronger operating leverage.

Compared to its peers, Pan American’s P/E is much lower than the peer average of 56x. This implies the stock could be undervalued relative to similar companies in the sector. Furthermore, it trades below its estimated fair P/E of 28.6x. This is a level the market could potentially move towards as confidence grows.

Explore the SWS fair ratio for Pan American Silver

Result: Price-to-Earnings of 24.3x (UNDERVALUED)

However, a shift in commodity prices or unexpected operational challenges could quickly change Pan American Silver’s outlook, even considering its recent momentum.

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

Another View: DCF Model Offers a Different Perspective

While Pan American Silver appears undervalued on a price-to-earnings basis, our DCF model suggests the current share price is significantly below its estimated fair value. This model estimates a fair value of CA$151.85, which is well above today’s CA$51.43. Could the market be missing something, or is the DCF model too optimistic?

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 919 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 dig deeper into the numbers, you can easily build and share 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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