Hecla Mining's (HL) stock has fallen over the past year because of lower silver prices, but that fall has been exacerbated by the events at the Lucky Friday mine that forced the company to suspend all activities at the mine for 2012. However, HL's stock may be a bit too low now. The valuation metrics, expect for that fact that the forward P/E that is a bit high relative to competitors because of the shut down at the Lucky Friday mine, suggest that the stock is undervalued. The stock is also forming a base and got out of below $4.50 a share that it reached in early January after the announcement of the Lucky Friday Mine shut down. Below is a closer look at the valuations.
Valuation: Hecla Mining's trailing 5 year valuation metrics suggest that the stock is undervalued as all of the metrics are below their respective 5 year averages. Hecla Mining's current P/B ratio is 1.3 and it has averaged 2.1 over the past 5 years with a high of 4.8 and low of 0.6. Hecla Mining's current P/S ratio is 2.8 and it has averaged 5.3 over the past 5 years with a high of 9.8 and low of 2.
Price Target: The consensus price target for the analysts who follow Hecla Mining is $7. That is upside of 23% from today's stock price of $5.48 and suggests that the stock has some upside these levels.
Forward Valuation: Hecla Mining is currently trading at about $5 a share with analysts expecting EPS of $0.39 next year, an earnings decrease of 13% y/y, for a forward P/E ratio of 14.1. Taking a look at the company's publically traded comparisons will give us a better idea of the stock's relative valuation. Coeur d'Alene (CDE) is currently trading at about $29 a share with analysts expecting EPS of $2.91 next year, an earnings increase of 111% y/y, for a forward P/E ratio of 10.
Pan American Silver (PAAS) is currently trading at about $25 a share with analysts expecting EPS of $2.81 next year, an earnings increase of 11% y/y, for a forward P/E ratio of 8.8. Silver Standard (SSRI) is currently trading at about $16 a share with analysts expecting EPS of $0.86 next year, an earnings increase of 51% y/y, for a forward P/E ratio of 19.2. The mean forward P/E of Hecla Mining's competitors is 12.6 which suggests that Hecla Mining is overvalued relative to its publically traded competitors.
Earnings Estimates: Hecla Mining has beat EPS estimates 1 times in the past 4 quarters. The company's EPS figures have come in between -3 cents and 2 cents from consensus estimates or about -21.4% to 15.4% from analyst estimates. The company has reported earnings that have differed from analyst estimates by a wide margin which suggests that the stock may experience upside from earnings surprises.
Top Stock Holders: The top two funds that own Hecla Mining are Market Vectors Gold Miners ETF, which owns 12.3 million shares or 4.48% of the shares outstanding, and Vanguard Small Cap Index, which owns 4.3 million shares or 1.53% of the shares outstanding. The top two institutions that own Hecla Mining are Vanguard Group, which owns 16 million shares or 5.71% of the shares outstanding, and Van Eck Associates Corporation, which owns 15.2 million shares or 5.42% of the shares outstanding.
Price Action: Hecla Mining is down 51.1% over the past year, underperforming the S&P 500, which is up 3.6%. Looking at the technicals, the stock is currently above its 50 day moving average, which sits at $5.32 and below its 200 day moving average, which sits at $6.63.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.