Southern Copper (NYSE:SCCO): Evaluating Valuation After Analyst Upgrades and Latest Earnings Beat

Southern Copper (SCCO) is getting a lot of investor buzz lately, and for good reason. The company’s latest quarterly earnings topped both revenue and EPS forecasts, an achievement that usually gets Wall Street’s attention. In addition, a series of upward revisions to its full-year earnings outlook has led investors to weigh the stock’s next move with fresh eyes.

Against this backdrop, Southern Copper shares have outpaced peers with a 14% gain over the past month and a solid 10% return in the last year. The stock’s momentum has picked up since earnings season, driven by those results and positive shifts in expectations. While the company saw steady annual growth in both revenue and net income, the recent price action suggests that investors are recalibrating their risk and reward assumptions.

With this rally unfolding, is there still a bargain left for buyers, or has the market already factored in Southern Copper’s expected growth?

Most Popular Narrative: 15.5% Overvalued

The prevailing narrative suggests that Southern Copper's current share price sits above what analysts view as fair value, based on a comprehensive review of future earnings, cash flow, and operational assumptions. The company’s future is closely tied to production expansions and commodity pricing tailwinds, but current levels may be factoring in more optimism than warranted.

Southern Copper has announced substantial capital investments totaling over $15 billion, including projects in Mexico and Peru, which are expected to drive future production growth and potentially boost revenue significantly. The company's Buenavista zinc concentrator is now operating at full capacity, anticipated to drive a 31% increase in zinc production in 2025. This is likely to enhance revenues and improve net margins due to efficient operations.

Curious about the story behind Southern Copper's lofty valuation? The most influential narrative relies on bold expansion projects and assumes steady profit margin gains. But which critical profit levers do analysts believe will bridge today's price and true fair value? The real numbers and logic behind this call might surprise you. They reveal the precise growth assumptions that could make or break the long-term outlook.

Result: Fair Value of $95.25 (OVERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, significant risks remain, including potential supply chain disruptions and unpredictable swings in copper prices. These factors could quickly challenge the current growth outlook.

Find out about the key risks to this Southern Copper narrative.

Another View: Our DCF Model Paints a Sharper Picture

While analysts highlight ambitious growth and major projects, our SWS DCF model offers a stricter look. According to this method, Southern Copper appears even pricier than the current market view. Does this challenge the optimism or highlight untapped risks?

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 Southern Copper 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 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 Southern Copper Narrative

If these perspectives don't align with your own, or you'd rather dive into the numbers firsthand, you have the option to build a personal narrative in just minutes. Do it your way

A great starting point for your Southern Copper research is our analysis highlighting 2 key rewards and 1 important warning sign 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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