Q: Hi
Just wondering if you have any insight into Pan American's recent weakness. Their Q2 results looked decent with an improving margin and fairly good free cash flow. As well, the guidance provided in the MD&A remained consistent with prior guidance.
Perhaps the stock was overvalued relative to the current commodity pricing?
Thank you
Just wondering if you have any insight into Pan American's recent weakness. Their Q2 results looked decent with an improving margin and fairly good free cash flow. As well, the guidance provided in the MD&A remained consistent with prior guidance.
Perhaps the stock was overvalued relative to the current commodity pricing?
Thank you
5i Research Answer:
While the results look decent, PAAS missed on revenue and EPS estimates. EPS was 11c vs estimates of 15c. Revenue was $686.3M missing estimates of $688.6M, up 7% from the year prior. The drawdown in days prior was likely driven by the broad market selloff that occured. National Bank attributed the earnings miss to higher silver segment costs, higher exploration and tax expense with partial offset from lower gold segment costs. So, there were also some operational drags at play here. The stock was trading above 20x forward price to earnings, so not cheap either.