Why Analysts’ Ratings for Pan American Silver Have Improved


Jul. 2 2018, Updated 4:50 p.m. ET

Pan American Silver’s price performance

Pan American Silver (PAAS) stock has outperformed its peers as well as silver prices YTD (year-to-date). As of June 26, it has risen 12.7% compared to -3.9% and -11.3% for the iShares Silver Trust (SLV) and the Global X Silver Miners ETF (SIL), respectively.

PAAS’s strong operational performance in 2018 has been the major reason for its stocks outperformance. Not only did the company announce better-than-expected first-quarter results due to lower costs, but it also announced that its Huaron mine in Peru is close to restarting. The local community was staging protests at the site, which led the company to suspend its operations in April.

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Analysts’ ratings for Pan American Silver

While there are still ongoing issues at Pan American Silver’s mines in Mexico, analysts’ overall sentiment for the company seems to be changing for the better. The percentage of “buy” ratings for the stock has improved from 45% at the end of October 2017 to 80% currently. It’s the second-highest percentage of “buy” ratings among the miners we’re covering in this series.

Analysts’ estimates

According to the consensus compiled by Thomson Reuters, Pan American Silver is expected to report revenue of $880 million in 2018, a rise of 10.7% YoY (year-over-year). While this rise is expected due to the slight increase in production, analysts have pared back their revenue estimates due to fresh issues at the company’s mine in Mexico. The revenue growth expectations for 2019 and 2020 are 9.6% and 2.5%, respectively.

Analysts are also most likely expecting PAAS’s costs to fall and its revenue to rise. Its EBITDA margin is expected to expand from 33% in 2017 to 36.5% in 2018 and reach 38% by 2020.

Pan American Silver used to be a high-cost producer compared to its peers (SIL) (GDXJ) First Majestic Silver (AG), Hecla Mining (HL), and Tahoe Resources (TAHO). But slowly and steadily, its costs are declining, which is expanding its margins.


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