It is no secret that silver has been a major underperformer as of late, along with gold. Over the past 12 months, silver has fallen 19 percent and that number could grow before we get a rebound. Ultimately, with all the central banks printing money and inflating the money supply, precious metals will have their day in the sun again soon. That is why those that are interested should be looking at Silvercorp Metals Inc. (NYSE: SVM).
Silvercorp is based in Canada, and does most of its mining and exploration in Canada and China. In fact, it is the largest silver producer in China, which gives it a significant edge over the competition. Another significant edge Silvercorp has over its industry peers is the fact that it produces silver at the cheapest rate and it has done so over the past five years. In addition, SVM has the largest dividend yield (2.5 percent) in the industry. To make matters even sweeter, management recently announced this month, that the company had discovered five new high-grade silver zones and extended its already existing zone in the HZG Mine. The new zones are located in the Henan Province of China, along with most of the company's existing projects.
Fundamentally, Silvercorp appears to be in good health. The company currently sports a price to earnings of 15 and a forward price to earnings of 8.15. Price earnings growth comes in at an overvalued 3.13 but earnings are expected to jump 6.6 percent this year and 79 percent next year. The company has no debt and $0.08 cash per share, giving it a healthy current ratio of 3.7. Moving on to margins, Silvercorp certainly looks very strong here. The silver miner has a gross margin of 65 percent, operating margin of 47 percent and a profit margin of 33 percent. These are important indicators to check as they help determine where the company could be heading over the long term.
The main risk involved with this name right now is that it really needs a strong underlying silver spot price for share price to move forward. Since late September 2012, Silvercorp has been in a downtrend trend, along with the underlying price of silver. In the same 12-month period that silver has fallen, Silvercorp has fallen 46 percent. However, as I stated earlier, I expect silver to rebound due to the highly unstable financial state of the U.S. and the rest of the world. Central banks are running their printing presses and it will ultimately come back to hurt us. That is why I am suggesting you stick with Silvercorp over the long haul. In the end, Silvercorp has great financial stability and is an industry leader. The company's lack of debt and ample cash load will help expand projects and mining zones in China, which will help the company fuel growth and a higher share price.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.