The mining sector has been challenged in the market for months as worries about worldwide growth and falling commodity prices have taken their toll on the stock prices of mining stocks. In the case of gold & silver miners, I think the selloff is overdone as precious metal prices have held up relatively well and are still close to historical highs in the context of things. I especially like miners that have consistently have been able to increase production and have significant earnings growth ahead of them. One such stock is Endeavour Silver (EXK).
"Endeavour Silver Corp is a mid-cap silver mining company, focuses on the growth of its silver production, reserves, and resources in Mexico and Chile." (Business description from Yahoo Finance)
6 Reasons there is significant value in EXK at $8 a share:
- The company just announced that production in the second quarter at its open mines increased silver production 22% Y/Y to over 1mm ounces. Gold production was up 59% Y/Y to just under 8,000 ounces.
- EPS is expected to ramp up substantially over the next two years. The company made just 22 cents a share in FY2011. However, analysts expect earnings to almost quadruple to 86 cents a share in FY2012 and $1.14 a share in FY2013.
- Endeavour has increased production for seven straight years. Analysts project sales will increase over 100% in FY2012 and 18% in FY2013.
- Consensus earnings estimates have risen sharply over the past three months for both FY2012 and FY2013. The stock is cheap at under 7 times forward earnings.
- The company has a robust balance sheet with over $130mm in net cash on the balance sheet (over 15% of market capitalization)
- The stock has good technical support at these levels (See Chart)
(click to enlarge)