Although the precious metals sector represents a historically volatile arena, investors may want to start considering ideas for the best silver stock to buy. With the convergence of low supply and increasing demand from burgeoning industries, the white metal could see significant gains.
Fundamentally, the silver shortage argument may once again rise to the forefront, according to a CNBC report. “Silver is in a shortage… and there is a notable drawdown in the available physical stocks held in New York and London’s physical hubs, more so than seen in gold,” said Nicky Shiels, head of metals strategy at precious metals company MKS PAMP. That’s one reason to research the best silver stock to buy.
Another comes down to geopolitics. Scientifically, silver represents an essential component in the production of both solar panels and electric vehicles. Further, the Infrastructure Investment and Jobs Act earmarks considerable funds for renewable energy initiatives. Naturally, this will increase the demand for silver. As well, other countries – particularly China – compete aggressively in advancing markets such as EVs. This should only benefit the best silver stock to buy. For a closer look at this sector, below are seven compelling ideas to consider.
Specializing in silver, gold, and other precious metals, Hecla Mining (NYSE:HL) is an intriguing albeit risky idea for the best silver stock to buy. On one hand, its market performance doesn’t appear too enticing. Since the Jan. opener, HL stock slipped more than 10%. Likely, this volatility centers on concerns that the Federal Reserve may raise interest rates to combat stubbornly high inflation.
As well, the prospect of higher borrowing costs doesn’t align well with risk-on ventures like Hecla. Indeed, the company’s financials are rather middling: not terrible for the industry but not great either. Nevertheless, following its struggles during the coronavirus pandemic, Hecla’s on a recovery trek. For instance, it posted revenue of $194.4 million in the fourth quarter of 2022, up 5% on a year-over-year basis. Interestingly, the company rates as slightly undervalued based on its trailing book valuation.
However, HL ranks among the top choices for best silver stock to buy among Wall Street analysts, who peg HL as a consensus strong buy. Moreover, their average price target stands at $6, implying over 18% upside potential.
Fortuna Silver Mines (FSM)
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Based in Vancouver, British Columbia, Fortuna Silver Mines (NYSE:FSM) operates in Argentina, Burkina Faso, Mexico, and Peru. Per its public profile, Fortuna primarily engages in producing silver and gold minerals. Like other proposals for the best silver stock to buy, FSM struggled amid the Fed’s monetary tightening fears. Since the January opener, shares tumbled about 15%.
Adding to volatility concerns, investment resource Gurufocus.com warns its readers that FSM may be a value trap. Generally, mining firms tend to be volatile, especially those focused on silver. However, on an objective basis, Fortuna enjoys certain strengths. For instance, the company’s debt-to-EBITDA ratio sits at 0.88 times, ranked better than 62.79% of the field.
Operationally, Fortuna’s three-year revenue growth rate stands at 12%, outpacing 63.29% of its peers. More impressively, its free cash flow (FCF) growth rate pings at 39.9%. This stat beats out nearly 85% of its rivals. Turning to Wall Street, analysts peg FSM as a consensus moderate buy. Additionally, their average price target stands at $4.29, implying over 33% upside potential.
First Majestic Silver (AG)
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Also based in Vancouver, First Majestic Silver (NYSE:AG) operates in Mexico and the U.S. It has four producing mines under its control: San Dimas Silver/Gold Mine, Santa Elena Silver/Gold Mine, La Encantada Silver Mine, and Jerritt Canyon Gold Mine. Unfortunately, market and economic woes imposed a painful bite out of First Majestic. Since the start of the new year, AG tumbled 28% in the charts.
However, for contrarians, the volatility could be an opportunity to pick up a candidate for the best silver stock to buy. To be sure, it’s not going to be an easy ride. As with Fortuna above, Gurufocus.com warns that First Majestic may be a value trap. Unfortunately, profitability turned negative on a trialing-year basis.
Still, note that the company’s three-year revenue growth rate stands at 10.8%, outpacing 60.28% of its peers. Also, AG trades at 1.22 times its book value. As a discount to this metric, First Majestic ranks better than 61.68% of sector rivals. For full disclosure, covering analysts peg AG as a consensus hold. However, their average price target stands at $8.61, implying 42% upside potential.
Silvercorp Metals (SVM)
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Based in Canada but focused on China, Silvercorp Metals (NYSEAMERICAN:SVM) engages in the acquisition, exploration, and development of silver-containing properties. Per its public profile, Silvercorp represents China’s largest primary silver producer. Interestingly, SVM has been spared much of the near-term volatility impacting its rivals. Since the Jan. opener, it’s down “only” 2.5%, adding to its candidacy for best silver stock to buy.
Financially as well, Silvercorp enjoys a more confident profile. According to Gurufocus.com’s proprietary calculations for fair market value, SVM rates as modestly undervalued. Objectively, much of its strengths lie in its operational attributes. For example, its three-year book growth rate pings at 10.2%, outpacing nearly 65% of its rivals.
On the bottom line, Silvercorp’s net margin stands at 11.3%, above 71.37% of the industry. Also, its return on asset (ROA) pings at 3.52%, beating out almost 83% of sector peers. Lastly, Wall Street analysts peg SVM as a consensus moderate buy. Further, their average price target stands at $4.68, implying over 59% upside potential.
Endeavour Silver (EXK)
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Another Vancouver-based precious metals enterprise, Endeavour Silver (NYSE:EXK) focuses on the exploration, development, and operations of quality silver mines. Given the rising industrial demand for the white metal, EXK may represent a long-term candidate for the best silver stock to buy. In fairness, though, EXK struggled amid the Fed’s monetary tightening fears, losing almost 12% since the January opener.
Nevertheless, for daring contrarians, EXK could be an interesting idea. Quite bluntly, at first glance, Endeavour’s fiscal profile looks bad. For one thing, Gurufocus.com warns it’s a possible value trap. Both its revenue growth and net margin slipped below breakeven.
However, per its Q3 earnings report, Endeavor is both growing the top line and paring down net losses. Also, the company features solid strengths in the balance sheet. Perhaps most notably, its Altman Z-Score is 4.7, indicating low bankruptcy risk. Turning to the Street, covering analysts peg EXK as a consensus moderate buy. Moreover, their average price target stands at $4.80, implying almost 66% upside potential.
McEwen Mining (MUX)
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One of the smaller entries among candidates for best silver stock to buy, McEwen Mining (NYSE:MUX) offers an intriguing opportunity. Primarily, the company focuses on three gold and silver-producing mines in low-risk jurisdictions of the Americas. Even better, MUX has the support of the market. While MUX gave up 21% of equity value on a trailing-year basis, since the January opener, it gained 1.5%.
According to Gurufocus.com, McEwen pings as a modestly undervalued investment. Objectively, MUX trades at a trailing book multiple of 0.82. As a discount to book value, McEwen ranks better than 79.13% of the competition. Operationally, the company could use some work as its revenue growth and net margin fell into negative territory. At the same time, its latest earnings report (Q3) demonstrated a paring of net losses against the year-ago quarter. Thus, McEwen might just need some patience.
Finally, H.C. Wainwright’s Heiko Ihle pegs MUX as a buy. Further, the expert believes shares will hit $10.25, implying 64% upside potential.
Pan American Silver (PAAS)
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Based in Canada, Pan American Silver (NASDAQ:PAAS) focuses on mining operations in Latin America. Per its corporate profile, Pan American Silver features mines and other projects in Mexico, Peru, Bolivia, and Argentina. Mainly, PAAS attracts attention as one of the biggest names among candidates for best silver stock to buy. However, that status alone didn’t spare PAAS from volatility, declining over 14% since the January opener.
As with many other silver players, Gurufocus.com warns that Pan American may be a value trap. While its overall financial profile isn’t great, it’s arguably decent enough. For instance, the company’s debt-to-equity ratio sits at 0.1 times, lower than the sector median value of 0.15 times.
Operationally, the company’s three-year revenue growth rate stands at 3%, outpacing nearly 66% of rivals. And while it incurred a heavy net loss in full-year 2022, its gross profit managed to poke its head into positive territory at $48 million. Despite some turbulence, Wall Street analysts peg PAAS as a unanimous strong buy. Also, their average price target stands at $24.61, implying nearly 68% upside potential.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.
