PAN AMERICAN SILVER CORP (NYSE:PAAS): A Strong Value Pick in the Precious Metals Sector

The search for undervalued stocks often leads investors to use basic screening methods that find companies trading below their true worth while showing good financial health, earnings, and growth prospects. One method is the "Decent Value" screen, which looks for stocks with a high valuation score (above 7 out of 10) while also checking for decent scores in earnings, financial health, and growth. This approach follows value investing ideas, where the aim is to find companies priced lower than their real value, backed by steady fundamentals.

PAN AMERICAN SILVER CORP (NYSE:PAAS) appears as a stock that fits this profile, offering an interesting chance for investors focused on value. The company, a silver and gold mining business with operations in the Americas, has shown a mix of appealing valuation measures and fundamental strength.

Valuation: A Core Factor for Value Investors

The valuation score for PAAS is 7/10, showing the stock is priced well compared to its earnings and cash flows. Key numbers supporting this include:

• Enterprise Value to EBITDA: PAAS trades at a ratio lower than 73.89% of its industry peers, suggesting it is undervalued based on its earnings before interest, taxes, depreciation, and amortization.
• Price/Free Cash Flow: The company ranks well, priced below 82.17% of competitors, highlighting its ability to generate cash.
• Forward P/E Ratio: At 14.14, PAAS is valued below both the industry average (33.20) and the S&P 500 (37.11), making it a relatively cheap stock despite expected earnings growth.

For value investors, these numbers are important—they help spot stocks where the market might be missing future earnings potential or stable cash flows.

Financial Health: Steady Despite Market Swings

PAAS has a health score of 6/10, showing a balanced financial position. Key strengths include:

• Low Debt Levels: A Debt-to-Equity ratio of 0.16 points to careful borrowing, lowering risk in unpredictable commodity markets.
• Good Liquidity: A Current Ratio of 2.93 means the company has enough short-term assets to cover liabilities, a positive sign for stability.
• Solvency: The Altman-Z score of 3.23 suggests low bankruptcy risk, backed by a Debt-to-FCF ratio of just 1.51, meaning the company could pay off its debt fast with free cash flow.

Financial health matters in value investing, as it ensures the company can handle economic downturns and keep running without high risk.

Profitability: Stable but Could Be Better

With a profitability score of 6/10, PAAS shows mixed but generally steady results:

• Margins: The company holds a 10.40% profit margin, beating 80.25% of industry peers, while its operating margin (18.53%) also ranks well.
• ROIC & ROE: Return on Invested Capital (6.63%) and Return on Equity (6.46%) are above industry averages, though not outstanding.

While not exceptional, these numbers suggest PAAS is turning resources into profits efficiently—a key point for value investors who prefer steady earnings over risky growth.

Growth: Past Success vs. Future Questions

PAAS has a growth score of 5/10, reflecting strong past performance but weaker future expectations:

• Past Growth: Revenue grew 18.34% YoY, with a 5-year average of 15.85%, while EPS jumped 5,900% last year (though from a small base).
• Future Estimates: Analysts expect slower EPS growth (2.59%) and a slight revenue drop (-3.24%), which could affect investor confidence.

For value investors, past growth confirms the company’s ability to perform, but the focus stays on whether current prices fairly reflect even modest future growth.

Conclusion: A Value Option in Precious Metals

PAAS stands out as a strong pick for value investors, trading at a discount to peers while keeping solid finances and earnings. Its valuation measures, along with low debt and good liquidity, match the idea of buying undervalued assets with a safety net.

For investors looking for similar opportunities, the Decent Value Stocks screen offers more stocks filtered by the same strict criteria.

Disclaimer: This article is not investment advice. Always do your own research or talk to a financial advisor before making investment choices.