Southern Copper (SCCO): Evaluating Valuation After EPS Decline Sparks Stock Dip Despite Revenue Growth

Southern Copper (SCCO) caught investor attention this week after its stock fell 3.37% on a day when the broader market was moving higher. The move was triggered by the company’s upcoming earnings report, which is expected to show a 3.48% decline in EPS compared to the same quarter last year. Interestingly, revenue is still forecasted to grow by 5.28%, a signal that despite underlying business strength, the market is focusing on profit pressure and how that aligns with the company’s valuation.

This dip stands out against a year where Southern Copper’s shares have returned 12.7%, continuing recent momentum seen across the past three years, even with periodic volatility. Over the past month, the stock has gained almost 7% as investors responded to broader themes in the materials sector and a steady trend of growth in core financial metrics. With analysts noting that SCCO trades at a discount to its industry peers, the shifting risk appetite is clearly influencing sentiment in the near term.

After this week’s move, investors may wonder whether Southern Copper’s pullback presents an opportunity or if the market is simply pricing in lower growth ahead.

Most Popular Narrative: 7.2% Overvalued

According to the most widely followed narrative, Southern Copper's current share price suggests that the stock is trading at a premium, factoring in its future earnings and growth potential.

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

Curious how this valuation stacks up? The heart of this narrative hinges on aggressive capital plans, bold forecasts for future earnings, and eye-catching profit assumptions. Wonder what financial formula drives Southern Copper’s share price even higher? Unlock the forecasts and see the projections fueling this market call.

Result: Fair Value of $95.25 (OVERVALUED)

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

However, escalating U.S.-China tensions or unexpected operational disruptions could easily challenge this optimistic outlook and undermine projected gains for Southern Copper.

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

Another View: What the SWS DCF Model Says

Taking a different approach, our DCF model does not see things the same way as the current market or analyst price targets. This method suggests the shares may actually be valued quite differently than many expect. Could this mean there is more risk here than meets the eye?

Look into how the SWS DCF model arrives at its fair value.

Stay updated when valuation signals shift by adding Southern Copper to your watchlist or portfolio. Alternatively, explore our screener to discover other companies that fit your criteria.

Build Your Own Southern Copper Narrative

If you feel differently about the outlook or want to dive deeper into the details, you can explore the numbers and form your own perspective in just a few minutes. Do it your way

A great starting point for your Southern Copper research is our analysis highlighting 3 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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