What’s Baked into Analysts’ Pan American Silver Ratings?



Pan American Silver’s price performance

Pan American Silver (PAAS) stock has outperformed peers as well as silver prices YTD. As of September 14, it has fallen 6.9% compared to falls of 17.3% and 27.7% 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 the stock’s outperformance. The company’s first-half results were well ahead of Wall Street expectations. It impressively lowered costs due to expansions at its La Colorada and Dolores mines in Mexico.

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Analysts’ ratings for Pan American Silver

There are ongoing issues at Pan American Silver’s mines in Mexico, but analysts seem to like the stock thanks to its strong financial position and improving operational performance. It currently has “buy” ratings from 60% of analysts, while the rest rate it a “hold.” It has the third-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 $843 million in 2018, a rise of 3.2% 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 continuing weakness in precious metal prices.

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 34.8% in 2018 and reach 38.2% by 2020.

Pan American Silver used to be a high-cost producer compared to 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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