Pan American Silver Corp. (NYSE:PAAS) Presents a Compelling Value and Growth Proposition

For investors looking to find possible bargains in the market, a disciplined method often uses filters for companies that seem priced low compared to their basic financial soundness and possibilities for expansion. One such tactic is to search for stocks with a good basic valuation score, meaning they might be cheaper than their true value, while also showing acceptable condition, earnings, and expansion. This mix tries to find chances where the market might be missing a company's caliber, providing a possible "margin of safety", a core idea of value investing.

Pan American Silver Corp. (NYSE:PAAS) recently appeared from this kind of filtering method. As a main silver producer with a group of mines in the Americas, the company's stock offers an example in weighing price against operational basics.

Valuation: An Interesting Entry Point

The main idea for any value-focused view of PAAS starts with its price measures. According to ChartMill's basic analysis, the stock gets a Valuation Rating of 7 out of 10, showing it is not expensive compared to its industry and future profit possibility. This score is especially notable considering the company's expansion outline.

• Forward-Looking Measures are Interesting: While the past Price-to-Earnings (P/E) ratio of 25.92 matches the wider S&P 500, the more meaningful Price-to-Forward Earnings ratio is 12.61. This is less expensive than 71.6% of similar companies in the Metals & Mining industry and is a notable difference from the S&P 500 average.
• Good Free Cash Flow Creation: The company's Price-to-Free Cash Flow ratio is more favorable than 80% of its industry rivals, emphasizing its capacity to create cash from operations, a key element for maintaining and increasing mining work without too much debt.
• Expansion Consideration: Maybe the most interesting point is the low PEG ratio, which changes the P/E ratio for anticipated profit expansion. With analysts predicting strong profit expansion coming, the current price seems to account for that future possibility.

For a value investor, these measures indicate the market may not be completely accounting for the company's profit path, creating a possible difference between price and true value.

Financial Condition: A Steady Base

A low-priced stock is only a good opportunity if the company is financially stable. PAAS receives a Condition Rating of 6, meaning a steady, if not outstanding, financial standing. Important solvency and liquidity measures give assurance.

• Controlled Debt Level: The company keeps a careful Debt-to-Equity ratio of 0.12, showing little dependence on debt funding. More notably, its Debt-to-Free Cash Flow ratio of 1.15 is with the best in its field, meaning it could in theory pay all its debt with just over a year of cash flow.
• Sufficient Liquidity: With a Current Ratio of 2.31 and a Quick Ratio of 1.55, PAAS has more than enough short-term assets to meet its upcoming debts, giving a cushion against operational changes or material price moves.
• No Bankruptcy Worry: An Altman-Z score of 5.02 clearly puts the company outside the "distress" area, meaning a low short-term chance of financial trouble.

This financial steadiness is vital for the value argument, as it lowers the chance of a "value trap", where a seemingly low-priced company is actually getting worse.

Earnings and Expansion: The Mechanism for Value Achievement

Value investing is not only about buying cheap assets; it is about buying low-priced caliber. PAAS's Earnings Rating of 6 and high Expansion Rating of 8 suggest the company has the operational mechanism to possibly grow into and support a higher price.

• Good Margins: The company's Profit Margin of 19.48% and Operating Margin of 25.17% do better than a large part of its industry peers. These margins have displayed betterment in recent years, indicating successful cost control.
• High Recent Expansion: Over the last year, PAAS has provided notable expansion, with Earnings Per Share (EPS) rising by 320% and Revenue going up by 21.75%. This shows strong operational effect.
• Maintainable Forward Movement: Looking forward, EPS is anticipated to grow at an average rate of over 21% each year, with Revenue expansion predicted near 10%. This anticipated increase from past patterns is a good sign for future cash flows and, therefore, true value.

This mix of high margins and strong expansion is what divides a possible value chance from a still company. It provides a believable path for the market to reprice the stock as future profits appear.

Conclusion: A Positive Aspect for Value Seekers?

Pan American Silver Corp. presents a detailed outline for investors. It trades at price levels that are interesting compared to its future profits, rests on a base of acceptable financial condition with little debt chance, and is currently displaying strong earnings and expansion. This matches a value tactic that looks for good businesses trading at sensible prices. The high expansion rating, specifically, indicates this might be a situation where the market is not fully valuing the company's short-term possibility.

Naturally, investing in a material producer like PAAS includes built-in chances linked to silver and gold price changes, political elements in working regions, and operational performance. The stock's low dividend payment of 0.93%, while increasing, may also be a point for payment-focused investors.

Interested in locating other stocks that match a similar outline of acceptable valuation, condition, earnings, and expansion? You can search for more possible chances using the Decent Value Stocks screen on ChartMill.

For a complete summary of all the basic elements talked about, you can see the full ChartMill Fundamental Analysis Report for PAAS.

Disclaimer: This article is for information only and does not make financial guidance, a suggestion, or an offer to buy or sell any security. The analysis uses data and ratings from ChartMill, and investors should do their own research and think about their personal financial situation and chance comfort before making any investment choices. Past results are not a guide for future results.