Is First Majestic Silver Corp. a Buy Under $10?

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Headquartered in Vancouver, Canada, First Majestic Silver Corp. (AG) acquires, explores for, develops, and produces mineral properties, focusing on silver and gold production in North America. AG shares have declined 47.2% in price over the past year and 40.1% over the past six months to close yesterday’s trading session at $8.35. The stock has slumped 24.8% year-to-date. Furthermore, BMO Capital analyst Ryan Thompson lowered his price target on the stock while maintaining his Market Perform rating. The analyst also reduced his EPS expectation for the first quarter of this year.

The company produced 7.2 million silver equivalent ounces, consisting of 2.6 million ounces of silver and 58,892 ounces of gold, in the first quarter.  Its total production increased 59% year-over-year, due primarily to the acquisition of Jerritt Canyon, but decreased by 16% sequentially due to high absenteeism related to an increase in COVID-19 cases in January and February, which resulted in lower processed tonnes across all Mexican operating units. Also, Thompson stated that AG’s consolidated gold and silver production for the quarter missed estimates by 14% and 19%, respectively.

AG has been trying to ramp up its operating capabilities at its mines, and “many of these efforts are expected to begin showing positive results in the second half of 2022 as we bring two past-producing underground areas, West Generator and Saval II, back into production,” said Keith Neumeyer, President, and CEO.

Here is what could shape AG’s performance in the near term:

Weak Bottom-Line Performance

For its fiscal year ended Dec. 31, 2021, AG’s revenues increased 60.5% year-over-year to $584.12 million. However, its mine operating earnings decreased 3.5% from their year-ago value to $101.42 million. The company’s net earnings came in at a negative $4.92 million, indicating a substantial decline from its year-ago value of $23.09 million, while its EPS stood at a negative $0.02 compared to $0.11 in the prior year. AG’s total comprehensive income declined 156.7% year-over-year to a negative $18.72 million. And its adjusted net earnings were $6 million, or $0.02 per share.

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Lofty Valuation

In terms of forward EV/Sales, AG is currently trading at 3.01x, which is 96.3% higher than the 1.53x industry average. Its 35.54x forward P/E  is 195.6% higher than the 12.03x industry average. Also, AG’s 2.78 forward Price/Sales ratio is…

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