Silver prices were trading at their highest levels earlier this year due to a Reddit-induced rally. However, prices declined to settle at $21.485 in September, their lowest level since July 2020, on indications of a forthcoming tightening of central bank monetary policy.
Analysts expect the metal’s demand to climb 15% globally this year to 1.03 billion ounces. Given silver’s heavy industrial usage and rebounding industrial activities, spot silver prices have bounced back to settle at $24.45 per ounce. The rally was driven by the passage of the b-partisan infrastructure bill this week, which is expected to bolster the demand for silver for electrical grids, WiFi, and electric vehicle charging stations. The iShares Silver Trust (SLV) ETF has gained 8.1% over the past month versus the broader SPDR S&P 500 ETF Trust’s (SPY) 7.1% returns.
Given this backdrop, we think fundamentally strong silver stocks Pan American Silver Corp. (PAAS) and Silvercorp Metals Inc. (SVM) could be ideal bets now.
Click here to check out our Gold and Silver Industry Report for 2021
Pan American Silver Corp. (PAAS)
PAAS, headquartered in Vancouver, Canada, explores, develops, extracts, and processes silver, gold, zinc, lead, and copper mines in North and South American locations, including Canada, Mexico, and Peru.
PAAS increased its quarterly dividend to $0.10 per common share in its second fiscal quarter, marking its third dividend increase in 18 months. In addition, the company restored ventilation in the high-grade area of its La Colorada mine, which enabled underground development. This should allow the company to ramp up production in the coming months.
For its fiscal second quarter, ended June 30, PAAS’ revenue increased 53.2% year-over-year to $382.13 million. Its adjusted income improved 320.3% from the prior-year quarter to $46.63 million, while its adjusted income per share rose 340% from the same period last year to $0.22.
A $1.21 consensus EPS estimate for the current year (fiscal 2021) indicates a 4.3% year-over-year increase. Likewise, the $1.73 billion consensus revenue estimate for the current year reflects a 29.4% improvement from the prior year.
The stock has gained 10.3% in price over the past month and 3.5% over the past five days to close yesterday’s trading session at $26.45.
PAAS’ POWR Ratings reflect this promising outlook. The stock has a Quality grade of B. In the 11-stock Miners – Silver industry, it is ranked #2. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
Click here to see the additional POWR Ratings for PAAS (Growth, Value, Momentum, Stability, and Sentiment).
Silvercorp Metals Inc. (SVM)
SVM acquires, explores for, and develops mineral properties in China and Mexico, and operates primarily in mining silver, gold, lead, and zinc. The company is based in Vancouver, Canada.
On October 14, SVM reported that it had found thick and high-grade intercepts from its LMW mine, located in the Ying Mining District, Henan Province, China, which increases the possibility of more significant revenue generation in the near term.
Also in October, the company announced that its subsidiary, Henan Found Mining Co. Ltd., won an auction to acquire 100% interest in the Kuanping silver-lead-zinc-gold project, located in the Shanzhou District, Sanmenxia City, Henan Province. In the same month, SVM declared that it had found a new gold vein and additional splay and parallel gold veins in its Ying Mining district’s DCG mine, indicating a gain in prospective profitability. These developments should expand SVM’s operational capability considerably.
SVM’s revenue increased 3.7% year-over-year to $58.44 million in its second fiscal quarter, ended September 30. Its net cash generated from operating activities rose 4.2% from the same period last year to $30.85 million, while its working capital went up 14.2% from the prior-year quarter to $193.31 million.
The Street’s revenue estimate for the next year (fiscal 2023) of $223.67 million indicates a 4.3% year-over-year improvement.
SVM’s stock has gained 16.7% over the past month to close yesterday’s trading session at $4.54. It has gained 7.6% over the past five days.
SVM has a B grade for Quality. It is ranked #3 in the Miners – Silver industry. In addition to the POWR Rating grades we have stated, one can see SVM ratings for Growth, Value, Momentum, Stability, and Sentiment here.
Click here to check out our Gold and Silver Industry Report for 2021
PAAS shares were trading at $26.67 per share on Tuesday afternoon, up $0.22 (+0.83%). Year-to-date, PAAS has declined -22.40%, versus a 26.13% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research.
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