Company Overview: Pan American Silver Corp. (NASDAQ: PAAS) is a silver and gold mining company that engages in related activities such as exploration, mine development, extraction, refining, and reclamation. The company also produces and sells zinc, lead, and copper. PAAS owns and operates silver and gold mines in Peru, Mexico, Argentina, Bolivia, and Canada. The company's Escobal mine in Guatemala is still on care and maintenance as of September 30, 2021, pending the successful completion of a consultation process undertaken by Guatemala's Ministry of Energy and Mines.
Key Takeaways from Q3FY21 (ended September 30, 2021)
Revenues & Gross Profit Key Highlights; Analysis by Kalkine Group
Consistent Dividends (Data Source: REFINITIV)
Balance Sheet & Liquidity Position
Key Metrics: PAAS's ROE and Reinvestment ratio in Q3Y21 were 2.8% and 2.3%, higher than the industry median of 1.5% and 1.9%, respectively. Its Debt/Equity ratio is relatively stable to 0.02x as of Q3FY21.
Leverage and Return Profile; Analysis by Kalkine Group
Top 10 Shareholders: The top 10 shareholders together form around 24.55% of the total shareholding, while the top 4 constitute the maximum holding. Van Eck Associates Corporation and The Vanguard Group, Inc., hold the maximum stake in the company at 10.39% and 3.05%, respectively, as also highlighted in the chart below:
Top 10 Shareholders; Analysis by Kalkine Group
Valuation Methodology: Price/Earnings Per Share Multiple Based Relative Valuation (Illustrative)
Source: Analysis by Kalkine Group
*% Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.
Stock Recommendation: The stock has corrected ~24.06% in the past twelve months. It is currently leaning towards the lower band of its 52-week range of USD 21.39 to USD 39.62. We have valued the stock using the Price/Earnings-based illustrative relative valuation method and arrived at a target price with an upside of low twenties (in percentage terms). We believe that the company can trade at a premium compared to its peer's average, considering its silver production capabilities, stable return profile, and negligible debt. We have taken peers like Fortuna Silver Mines Inc. (NYSE: FSM), Hecla Mining Company (NYSE: HL), and others. Considering the robust top-line growth, proven track record, strong return profile, encouraging outlook, and current valuation, we give a "Buy" recommendation on the stock at the current price of USD 24.40, down ~0.85%, as of December 22, 2021, 10:15 AM ET.
PAAS Technical Chart, Data Source: REFINITIV
Note 1: The reference data in this report has been partly sourced from REFINITIV.
Note 2: Investment decision should be made depending on the investors' appetite for upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the valuation has been achieved and subject to the factors discussed above.
Technical Indicators Defined
Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.
Resistance: A level where-in the stock prices tend to find resistance when they are rising, and the uptrend may take a pause due to profit booking or selling interest.
Stop-loss: It is a level to protect further losses in case of unfavorable movement in the stock prices.
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