Pan American Silver (TSX:PAAS) Could Be 23% Below Fair Value As Silver Deficits Draw Focus
The Silver Institute’s report of a sixth consecutive global silver supply deficit is drawing fresh attention to primary producers. Pan American Silver (TSX:PAAS) is central to that discussion, given its scale and its role in sector consolidation.
Pan American Silver’s share price has moved to CA$71.33, with a 1 day share price return of 2.56% and a 30 day share price return of 18.17%. The 1 year total shareholder return of 53.90% and 3 year total shareholder return of about 2.6x suggest momentum has been building over a longer period despite some shorter term pullbacks.
Scan proven precious metals producers alongside Pan American Silver by reviewing the hand picked 10 top silver producer stocks that could also be drawing interest as the silver supply deficit persists.
The move to CA$71.33 has widened the gap between Pan American Silver's market price and both analyst targets and intrinsic value estimates. Is the stock already pricing in the silver deficit story, or is there still a valuation cushion?
Most Popular Narrative: 22.9% Undervalued
Against the CA$71.33 share price, the most followed narrative assigns Pan American Silver a fair value of about CA$92.50 using a discounted cash flow framework.
The phased development approach at La Colorada Skarn, which combines high grade Skarn zones with the vein mine and shared infrastructure, is designed to moderate upfront capital intensity while seeking to support silver output and project level returns. This in turn can feed into future revenue and cash flow.
Want to see what is baked into that CA$92.50 figure? The narrative leans on rising earnings, firm margins and a richer future earnings multiple. The detailed playbook sits behind that fair value.
Result: Fair Value of CA$92.50 (UNDERVALUED)
Have a read of the narrative in full and understand what's behind the forecasts.
However, the Pan American Silver narrative can be knocked off course if La Colorada Skarn is delayed or if ongoing technical issues at key gold mines persist.
Find out about the key risks to this Pan American Silver narrative.
Another View on Pan American Silver’s Valuation
The earlier narrative leans on a discounted cash flow view that points to Pan American Silver trading below a CA$92.50 fair value. Yet on simple earnings multiples the picture is more mixed. The current P/E of 15.6x is slightly above peers at 15x but below a fair ratio of 20.9x, which suggests some upside but also less of a clear cut gap. Which signal should carry more weight for you?
To see how this earnings multiple story is built out across peers and the fair ratio, take a closer look at the valuation breakdown, including the See what the numbers say about this price — find out in our valuation breakdown..
Next Steps
Given the mix of optimism and caution throughout this Pan American Silver story, it makes sense to move quickly and test the numbers yourself. To balance the potential rewards against areas of concern, review the 4 key rewards and 1 important warning sign.
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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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