Pan American Silver (TSX:PAAS) shares have seen quite a bit of movement lately, with the stock up over 50% so far this year. Recent performance is drawing new attention from investors who are considering trends in precious metals.
After months of strong momentum, Pan American Silver’s share price has soared over 50% year-to-date and the 1-year total shareholder return sits at 52.7%. While there has been a recent pullback over the past month, the longer-term trend suggests investor enthusiasm is holding as silver prices fluctuate and precious metals regain attention.
With strong recent gains and robust annual growth in both revenue and net income, investors are left to ask whether Pan American Silver is still trading below its true value, or if the market has already priced in future growth potential.
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Price-to-Earnings of 26.8x: Is it justified?
Pan American Silver’s shares trade at a price-to-earnings (P/E) ratio of 26.8x, which is closely aligned with the average for comparable peers at 26.9x. However, the broader Canadian Metals and Mining industry reports a lower average P/E of 19.8x, making Pan American appear somewhat expensive relative to its sector benchmark.
The price-to-earnings ratio indicates how much investors are paying for each dollar of company earnings. In capital-intensive industries like mining, a higher P/E can be explained by expectations of faster earnings growth, better margins, or higher perceived future returns.
In this context, Pan American Silver's P/E is considered good value compared to its peers and its own estimated fair P/E of 28.5x. This suggests the market is not significantly overpricing the company’s potential. While the sector as a whole trades at a lower multiple, Pan American’s recent earnings momentum and profit turnaround could make this premium more reasonable. If the market aligns more closely with the company's fair P/E, there may still be potential for upside as sentiment improves.
However, risks such as commodity price volatility and potential shifts in investor sentiment could quickly challenge the case for further share price upside.
Looking at Pan American Silver through our SWS DCF model, the shares are currently trading around 3.8% below estimated fair value (CA$46.77 vs. CA$48.60). This suggests a small discount, which appears less dramatic than the multiples implied. Does the DCF signal a value opportunity, or simply reflect market caution?
If you want a different perspective or enjoy digging into the numbers yourself, you can craft your own unique view in just a few minutes. Start now with 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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Engages in the exploration, mine development, extraction, processing, refining, and reclamation of mines in Canada, Mexico, Peru, Bolivia, Argentina, Chile, and Brazil.
