As market volatility continues to be a regular market staple, the commodity plays are attracting more and more investors. The precious metals have long been thought of as safe havens, but whether the miners of that metal can deliver on that idea is a different story. If you’re looking to add some beta to your portfolio, you may want to read about these five silver companies. These five were chosen because of their opportunities for profit margin expansion and earnings ratio multiple expansion through growth. Use this analysis as a starting point for your own research.
First Majestic Silver Corporation (AG) – At its current price of around $17, First Majestic is trading right in between its yearly low set back in January and its yearly high which was set in April. Although the price of silver has been pushed down in recent weeks, First Majestic has been able to hold its own in the high teens. Compared to competitors Silvercorp Metals (SVM) and especially Silver Standard Resources (SSRI), First Majestic’s P/E of 19.46 leaves something to be desired. The company is a key player in the Mexican silver mining market and stands to reap substantial benefit from emerging market demand for precious metals. The 42% profit margin is impressive for the silver space right now, but the rising value of the U.S. dollar is definitely something to keep an eye on. If the dollar continues to gain strength in the coming weeks it could damage the profitability of a First Majestic in the short term. The beta of 1.29 means that First Majestic isn’t as volatile as some of its competitors and could be a worthwhile pick for someone who isn’t a fan of volatility.
Silver Standard Resources Inc. (SSRI) – The current price of around $14 is slightly higher than the yearly low set on December 15, 2011. The company is well off of its yearly high of around $35 in April, when silver was really on a tear. Although the company operates in numerous countries across South America, it focuses heavily on its silver mine located in Argentina. The company suffered a blow in September when the Pirquitas mine was temporarily shut down due to safety concerns caused by some older equipment. In comparison to competitor First Majestic Silver, Silver Standard also stands to gain handsomely due to increased emerging market demand for precious metals. Although the P/E of 2.52 is incredibly low compared to competitors, Silver Standard may only be one to add to your watch list for the time being. Silver Standard’s share price has been harmed the most by the decline in silver prices over the past week and a further decline in silver could spell a new yearly low once again.
Silvercorp Metals Inc. (SVM) – Silvercorp is slightly above $6, which is also less than $1 above the yearly low set back in September. As with its competitors, the yearly high of slightly above $16 is a distant memory set back in April. What sets Silvercorp apart from its competitors is the steady dividend, paid like clockwork throughout silver's roller coaster ride over the past several years. With a healthy P/E of just 12.79 and the 1.5% yield, Silvercorp stands out in the industry. Using the miners as a means of speculating on silver prices is a strategy that has been in play for years, but to receive income while waiting for silver's next big move is unprecedented. As the primary silver producer in China, Silvercorp stands to benefit greatly from the continued expansion of China’s middle class. Despite the positive comments on Silvercorp, its share price is heavily tied to the price of silver. Yet, if you are bullish on silver and looking to put your money where your mouth is, Silvercorp seems to be a good fit.
Coeur d’Alene Mines Corporation, (CDE) – At just below $26, Coeur d’Alene is off its low of around $19 set back on the infamous October 4, 2011. Yet, quite a ways from its yearly high of $37.59 set earlier in the year. With a beta of 1.61, it is on the more volatile side of the silver miners and can offer potential for regular trading as silver continues to move around frequently. The P/E of 29.66 is significantly higher than competitors Newmont Mining (NEM) and Pan American Silver (PAAS). The gross margin of 57.46% is also on the lower side when you consider the industry average is 66.45%. Despite these issues, Coeur d’Alene is well diversified with mining operations spanning several continents. The company also has its hands in gold production, which can prove to be lucrative as time progresses. Based on the data, Coeur d’Alene may be more of a trader's game. For long term investors, some of the other silver miners may provide more slow and steady growth if the price of silver moves upward in the future.
Endeavour Silver Corporation, (EXK) – At the recent close of around $10, Endeavour Silver is trading right in between its yearly high of around $13 set in September and its yearly low around $5 set in January. Having the lowest beta of any of the names mentioned in this article may not be a bad title to have, judging from how the shares have held up through the dollar's recent appreciation and the overall decline in silver. Similar to competitor Coeur d’Alene, Endeavour Silver has a relatively high P/E of 25.54, although Endeavour’s operating margin of 66.72% is right in above the industry average. The company’s primary focus is in mining and exploration of precious metal as well as mineral mining operations in Mexico. As with competitors First Majestic Silver and Silver Standard Resources, the emerging market potential of precious metal sales is an enticing aspect of Endeavour’s business. Although the company’s mines operate solely in Mexico, it is comforting to know that its business is diversified beyond strictly mining operations. Due to the low beta, recent volatility in the overall market as well as the precious metal markets, Endeavour is a noteworthy stock for those with slightly lower risk tolerance.