The latest surge in silver prices has seen companies on this list profiting handsomely. Their revenues should continue to rise as silver production increases through new exploration programs or by acquisitions. These stocks are only suitable for investors who have the emotional and financial resources to stomach the ride that comes with holding stocks that are leveraged to volatile silver prices. Overall, "poor man's gold" has a lot going for it: A weak economy, high inflation prospects and a weak dollar all bode well for higher silver and gold (NYSEARCA:GLD) prices. Please us this analysis as a starting point for your own due diligence:
First Majestic Silver Corp (NYSE:AG): First Majestic Silver is a Canadian company that mines silver and other metals. Its focus is on silver mining in Mexico.
This is a highly volatile stock. Its 52 week range is $5.74 to $ 26.88. The stock currently trades at $20.52 and is valued at 26.6 times its trailing twelve months (ttm) earnings. It is up about 40% for the year.
Second quarter results were stellar. Revenues jumped 23% over the first quarter and 148% over the same period last year. Management lifted its fiscal 2011 earnings guidance to $4.00 per share and reaffirmed its 2011 production guidance of 8 million ounces of silver.
Results from its resource development program at the La Parrilla Silver mine exceeded management’s expectations. Proven and probable reserves totaled 37.1 million ounces, representing an astounding 607% increase over previous estimates. This bodes well for earnings in the forthcoming quarters as production is ramped up.
Endeavour Silver Corp. (NYSE:EXK): Endeavour Silver has silver mining interests in Mexico and Chile.
This stock’s 52 week range is $3.80 to $13.09. It trades around $12.52, valued at 43.1 times its trailing twelve month (ttm) earnings. The stock has trounced the market, rising over 60% for the year.
The company’s finances are in great shape. Revenues jumped 85 % in the second quarter whilst operating cash flow soared 553 % on higher production at its Guanajuato mines and silver prices. The balance sheet is solid. It is free of debt with over $133 million in cash and investments. Since 2004, Endeavour has been using cash from its operations to fund explorations and acquisitions.
The second half of the year should see Endeavour raising its production once plant expansion programs at its Guanajuato mines are completed. Third quarter results should be solid.
Management is quite optimistic for its prospects this year, projecting over six-fold growth in earnings for the full year.
Great Panther Silver (NYSEMKT:GPL): Great Panther, operates precious metals mines in Mexico. Its mining operations primarily produce silver ore. As a result, the company’s Achilles heel is its leverage to silver prices.
The stock trades at $3.22, valuing the company at 48.7 times its trailing twelve months earnings. The 52 week range is $0.91 to $5.04. It’s up about 20% for year.
Second quarter results were mixed. Revenue was down 8% whilst earnings from operations jumped 15% over the same period last year. Net income slumped 50% over the same period as well. Management blamed shipment delays at its Guanajuato mine for the lacklustre results.
Things should right themselves in the coming quarters as the sales backlog reduces. The company is in good financial shape with the balance sheet free of long term debt and 37.7 million in cash as of June 30th. This should provide a buffer to minimize any adverse effects on operations due to the temporary build up of inventory. Despite this short term challenge, management is still going ahead with its plans to increase production.
Silver Wheaton (NYSE:SLW): Silver Wheaton makes its money from silver sales purchased under long term agreements. It has purchase contracts in place with mines from Mexico, Sweden, Peru, and Greece.
The nature of the company’s operations makes the stock subject to wide swings in its price. It’s about 2% up for the year. The stock trades at 28.4 times its trailing twelve months (ttm) earnings, cheaper than Coeur d`Alene Mines Corporation (NYSE:CDE) at 104.3 (ttm).
Despite its volatile stock price, results for the first half of the year were great. Revenues jumped 95% to $353 million with the gross margin widening 14%. Net income soaring fourfold to $0.76 per share compared to $0.19 over the same period last year.
As of June 30th, about 3.5 million ounces of payable silver was attributable to the company. This will be recognized in future sales as and when they are delivered under the terms and conditions of their contracts. This is an increase over the first quarter of about 0.5 million ounces.
The company’s recent acquisitions have seen it growing impressively in the precious metals sector. It’s positioned to register a 90% increase in silver output from last year to 2015. For this year, management maintained its guidance, forecasting 27-28 million ounces of silver, including 15 000 ounces of gold.
Silver Corp Metals (SVM): Silver Corp is engaged in silver mining operations in China and Canada. The company has interests in four mines.
This stock is the cheapest on the list. The stock trades around $7.01, valuing the company at 14.9 times its trailing twelve months (ttm) earnings. It has fallen about 50% for the year no doubt due to fraud allegations (see below).
Silver Corp has been in the news lately. Short sellers are accusing the company of tax fraud which has depressed the company's stock price. Management views the market’s reaction as overblown. They have issued statements dismissing the accusations and have also started repurchasing shares. The chief executive put his money where his mouth is and, for September, has bought 235 000 shares in the open market. Analysts are skeptical of the allegations and therefore continue to maintain their ratings.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.