Is It Too Late To Consider Pan American Silver (TSX:PAAS) After A 105% One Year Surge?

• If you are wondering whether Pan American Silver at around $70.19 is still offering value after a strong run, this breakdown will help you frame the opportunity and the risks in practical terms.
• The share price is around $70.19 after a 9.1% decline over the past week, a 1.6% decline over the last 30 days, a 0.2% gain year to date, and very strong returns of 105.2% over 1 year, 203.4% over 3 years, and 90.8% over 5 years. These shifts can influence how the market prices growth potential and risk.
• These moves sit against a backdrop of ongoing sector attention on precious metals producers and on how investors think about companies with both short term price swings and longer term return records. For you as a shareholder or potential investor, the key question is whether the recent price action lines up with the fundamental value of the underlying business.
• On Simply Wall St’s valuation checks, Pan American Silver scores 1 out of 6 on perceived undervaluation. You can review this in more detail through its valuation score. The rest of this article will walk through different valuation approaches and then finish with a way to tie them together into a fuller view of what the stock might be worth.

Pan American Silver scores just 1/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Pan American Silver Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow, or DCF, model estimates what a company could be worth today by projecting its future cash flows and then discounting those back to a single present value figure.

For Pan American Silver, the latest twelve month Free Cash Flow is about $912.98 million. Analysts provide explicit forecasts out to 2028, where Free Cash Flow is projected at $1,588.75 million, and Simply Wall St then extrapolates further cash flows out to 2035 using the same 2 Stage Free Cash Flow to Equity framework.

When all of these projected cash flows are discounted back to today, the model arrives at an estimated intrinsic value of about $60.76 per share. Against a current share price of around $70.19, this implies the stock is roughly 15.5% above the level suggested by this DCF output, which indicates limited valuation support on this specific metric.

Result: OVERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Pan American Silver may be overvalued by 15.5%. Discover 4 high quality undervalued stocks or create your own screener to find better value opportunities.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Pan American Silver.

Approach 2: Pan American Silver Price vs Earnings

For a profitable company, the P/E ratio is a helpful way to connect what you pay today with the earnings the business is currently generating. It lets you see how many dollars of share price the market is asking for each dollar of earnings.

What counts as a “normal” P/E depends on how investors view a company’s growth prospects and risk. Higher expected growth and lower perceived risk often justify a higher P/E, while slower growth or higher uncertainty usually line up with a lower P/E.

Pan American Silver is trading on a P/E of about 22.13x. That sits above the Metals and Mining industry average of 16.92x and above the peer average of 18.59x, so the market is currently putting a richer price on its earnings than on many peers.

Simply Wall St’s Fair Ratio for Pan American Silver is 23.75x. This is a proprietary estimate of what a reasonable P/E could be, given factors such as earnings growth, profit margins, industry, market cap and stock specific risks. Because it incorporates these fundamentals, the Fair Ratio aims to be more tailored than a simple peer or industry comparison.

Comparing Pan American Silver’s current P/E of 22.13x with the Fair Ratio of 23.75x suggests the shares are trading below that model driven reference point.

Result: UNDERVALUED

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Upgrade Your Decision Making: Choose your Pan American Silver Narrative

Earlier it was mentioned that there is an even better way to understand valuation. Narratives on Simply Wall St let you attach a clear story to your numbers by linking your view of Pan American Silver’s projects and risks to a forecast for revenue, earnings and margins, then to a Fair Value that you can compare with the current price to judge whether it fits your own criteria. The Community page shows that some investors currently anchor on a very optimistic case with Fair Value around $331.00 per share, and others on a more cautious view near CA$63.05. These figures update automatically as new data such as production news or earnings are added, so you can see in one place how different perspectives translate into numbers and what that means for your own decisions.

For Pan American Silver, however, we will make it really easy for you with previews of two leading Pan American Silver Narratives:

These are not predictions, they are structured scenarios created by community contributors to show how different assumptions about metal prices, volumes, costs and capital spending can translate into very different fair value estimates for the same stock.

🐂 Pan American Silver Bull Case

Fair value in this bullish narrative: US$331.00 per share

Implied undervaluation versus the recent price of about US$70.19: roughly 79% below this narrative fair value

Assumed revenue growth rate used in the narrative: 67.92%

• The author assumes Pan American Silver benefits from very high precious metal prices, with silver at US$100 per oz and gold at US$3,000 per oz, and uses those levels to anchor revenue and free cash flow estimates.
• The scenario layers in extra silver volume from Escobal and potential future contribution from Navidad, on top of the current 2024 production forecast of 22 million oz of silver and 925,000 oz of gold.
• A multiple of 15x on the resulting free cash flow and an assumed share count of about 210 million are used to reach a fair value of roughly US$331 per share. This highlights how sensitive the outcome is to commodity price and cost assumptions.

🐻 Pan American Silver Bear Case

Fair value in this bearish narrative: CA$63.05 per share

Implied overvaluation versus the recent price of about CA$70.19: roughly 10% above this narrative fair value

Assumed revenue growth rate used in the narrative: 20.16%

• The author focuses on risks around mine integration, project execution and higher sustaining capital, including Juanicipio, La Colorada Skarn, Jacobina, Huaron, Timmins and other assets where development and technical work may affect cash costs and timing of free cash flow.
• The narrative leans on the lower end of analyst assumptions for revenue, margins and earnings out to around 2029 and pairs those with a future P/E of 11.9x, which sits below the current P/E used for the US Metals and Mining industry in the narrative.
• This combination of more cautious operating assumptions, dilution from share count growth and a lower exit multiple produces a fair value of CA$63.05. The author uses this to frame a more conservative stance on what the shares could be worth.

These narratives sit at opposite ends of the current range and are built from very different assumptions about metal prices, project delivery and capital allocation. If you want to see how other investors connect their assumptions to fair value, or build a version that matches your own expectations for Pan American Silver, Curious how numbers become stories that shape markets? Explore Community Narratives.

Do you think there’s more to the story for Pan American Silver? Head over to our Community to see what others are saying!

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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