Has PAAS Stock Finally Bottomed?
Pan American Silver Corp. (NASDAQ:PAAS) could see a solid move to the upside when silver prices rise. Over the past year, the company has turned its business around, which could prove a profitable outcome for owners of PAAS stock shares.
When silver prices are down, you want to see miners boosting production, reducing costs, increasing cash flow, and managing debt. These things will keep the miners in business long-term and prepare them for huge profits when silver prices turn. This is something I have said many times in these pages.
Is PAAS Stock Undervalued?
Keeping this in mind, Pan American is doing what needs to be done. Also, not too long ago, the company started to produce gold to diversify its revenue streams. From our perspective, all of this is making a bullish case for PAAS stock.
Consider the following: in the second quarter of 2015, Pan American produced 6.65 million ounces of silver; this was nine percent higher than the first quarter of 2015. Costs at Pan American are also declining, sitting at $14.46 per ounce today, or 20% less than a year ago. (Source: “Pan American Silver Reports Increased Silver and Gold Production and Lower Costs for The Second Quarter of 2015 and Declares Third Dividend of The Year,” PR Newswire, August 13, 2015.)
Pan American’s gold production is notable, too. In the second quarter of 2015, the company produced 44,400 ounces of gold, an 18% increase in production over the first quarter of 2015.
Financial conditions are also solid at Pan American. The company generated $20.5 million from operations in the second quarter; this was 75% higher than the first quarter of 2015. Additionally, the company has working capital of $469 million.
An added bonus for investors, Pan American pays a dividend. In the first six months of 2015, the company has paid $26.0 million in dividends.
Investors should note that PAAS will be releasing its financial results for the third quarter of 2015 on November 12. It will be interesting to see what kind of production and cost figures Pan American reports; they could have a significant impact on PAAS stock.
Technical Analysis of PAAS Stock
Looking at Pan American’s stock performance, PAAS stock has shed a significant amount of value. Please look at the chart below and pay attention to the circled area.
Chart courtesy of www.StockCharts.com
PAAS stock is down for the year, but we saw something interesting happen between August and October: the stock price found strong support at the $6.00 level. This level was tested four times and prices never broke below it. This tells us that there are buyers in the area.
PAAS Stock Outlook; Could A Bottom Be In Place?
Understand this: one of the biggest reasons PAAS stock has declined is plunging silver prices. As a company, Pan American has improved substantially in the midst of all of this.
When silver prices turn (read more about where I expect them to go next here), don’t be shocked to see PAAS stock show a solid move to the upside.