Does Southern Copper’s Surging Stock Price Signal Opportunity After 39.5% Year-to-Date Jump?

Thinking about what to do with Southern Copper’s stock right now? You are definitely not alone. Whether you are a longtime investor enjoying striking returns over the past few years, or someone just tuning in, there has been a lot to consider lately. The share price has powered higher, up 39.5% year-to-date and boasting a huge 240.7% gain over the past five years. The last month alone saw a 22.5% jump, though things took a minor dip of -2.5% over the past week. These swings track with recent shifts in copper demand and broader optimism swirling around infrastructure and renewable energy spending worldwide, giving Southern Copper a clear runway for attention.

On the face of it, Southern Copper looks like a growth story built to last. But, when it comes to valuation, things get interesting fast. Across six different undervaluation checks, Southern Copper scores a 0, meaning it is not currently seen as undervalued by the usual metrics. Should you worry about overpaying, or is this premium deserved for such robust growth? Up next, we will break down each valuation approach step by step, and stick around, because at the end I will show you a smarter way to think about valuation that puts all the pieces together.

Southern Copper scores just 0/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Southern Copper Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow (DCF) model estimates a company’s intrinsic value by projecting its future free cash flows and discounting them back to today’s dollars. In simple terms, it tries to determine what all of Southern Copper’s expected future cash generation is worth right now.

According to the latest data, Southern Copper’s free cash flow over the last twelve months was $3.36 billion. Analyst estimates are available for the next five years, with projections peaking at $3.00 billion by 2029. Beyond that period, Simply Wall St extrapolates additional cash flows to complete a ten-year projection.

Summing up the entire period of forecasted flows and discounting them to present value, the DCF output for Southern Copper currently calculates its intrinsic value at $52.33 per share. However, with the actual share price trading at a level 139.1% above that, the stock appears substantially overvalued using this cash flow approach.

Result: OVERVALUED

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

Our Discounted Cash Flow (DCF) analysis suggests Southern Copper may be overvalued by 139.1%. Find undervalued stocks or create your own screener to find better value opportunities.

Approach 2: Southern Copper Price vs Earnings

For healthy, profitable companies like Southern Copper, the Price-to-Earnings (PE) ratio is one of the most widely used ways to gauge value. The PE ratio helps investors answer a simple question: How much are you paying for each dollar of the company’s profit? Typically, higher expected growth or lower risk justifies a higher PE, while slower earnings growth or greater risk pushes it lower. Understanding the appropriate “normal” PE ratio involves looking at both company specifics and industry context.

Southern Copper currently trades at a PE ratio of 28x. This is above both the Metals and Mining industry average of 24.6x and the average among its direct peers at 26.5x. At first glance, this might make the stock appear a bit pricey compared to similar companies. However, benchmarks such as sector or peer averages do not always provide the full picture. This is where the Simply Wall St Fair Ratio comes in.

The Fair Ratio is a proprietary metric that estimates what PE is justified for this specific company, factoring in elements such as earnings growth rates, profit margins, industry outlook, and company size. Unlike traditional comparisons, the Fair Ratio considers more than just where other companies trade. It provides a tailored assessment of what Southern Copper deserves given its unique qualities and risks. For Southern Copper, the Fair Ratio is 25.9x, just below its current 28x multiple. This suggests that while shares are trading at a premium, the difference is not substantial, and the stock is only moderately above its fair valuation based on fundamentals.

Result: OVERVALUED

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

Upgrade Your Decision Making: Choose your Southern Copper Narrative

Earlier we mentioned that there's a better way to understand valuation, so let's introduce you to Narratives, a smarter and more dynamic approach to investment analysis now available on Simply Wall St’s Community page. A Narrative is your own story about a company, transforming raw data into context by linking your expectations for Southern Copper’s future, such as estimated earnings, revenue growth, and profit margins, with a fair value figure that truly reflects your perspective. Narratives connect what’s happening in the business and industry to financial forecasts and the current share price. This allows you to compare your view of fair value directly against where the market sits right now, making decisions about when to buy or sell much clearer. They are easy to use, automatically updated with the latest news or earnings, and popular among investors worldwide. For example, if you think Southern Copper’s production expansion will drive outperformance and take a bullish stance, your Narrative might align with the highest analyst price target of $128.70. If you are more cautious about costs or project risks, your fair value might fall closer to the lowest estimate of $66.63. Narratives let you put your expertise into action, backed by real numbers, always current, and personalized to your view.

Do you think there's more to the story for Southern Copper? Create your own Narrative to let the Community know!

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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