First Majestic Silver Corp. (AG)

[goforthebet]

This Silver Stock Excites Every Silver Bull

https://seekingalpha.com/article/4059780-silver-stock-excites-every-silver-bull#alt2



Apr. 3, 2017 9:36 AM ET| About: First Majestic Silver Corp. (AG)
John Manfreda

Valuations aren't cheap, but not expensive either, trading at roughly 13 times cash flow and EV/EBITDA ratio of 11.41.

Future Production growth can reach 20 million ounces of silver on an annual basis.

Strong financials, with a current ratio of 3.64, a total assets to total Liabilities ratio of 3.64.

First Majestic is a hold for now, but a buy at $6.50 per share or lower.

One of my followers requested that I write an article about First Majestic Silver (NYSE:AG). In my opinion I would rate this as a hold for now, but I think this stock will rise substantially over the next couple of years as the price of silver starts to rise drastically.

In terms of valuation, First Majestic is trading at roughly 13 times its cash flow, and has an enterprise value/EBITDA ratio of 11.41. It has a price to book value ratio of 2.15. I wouldn't say this company is cheap, but I don't think it's overvalued either.

What First Majestic does have though is leverage to silver. A lot of companies that had leverage to silver are now becoming more of a precious metal play, and not a silver play. Two examples of this are Silver Standard, which no longer has a silver mine anymore, and Silver Wheaton, which is now in the mist of changing its name, because its revenue is becoming less reliant on silver. Large mining companies are unable to keep their silver leverage status, which makes First Majestic a much more compelling stock. Currently, 70 percent of First Majestic's revenue comes from Silver.



Source for this chart can be found on First Majestics corporate presentation, or can be found here.

Looking at its costs, that is very impressive. Most silver miners of this size, produce silver at a cost of roughly $14 dollars an ounce.

What I like to most about this company is its production growth.



Source for this graph can be found in First Majestics corporate presentation, or can be found here.

As stated in the graph above, this is a company with an estimated production goal of 20 million ounces of silver on an annual basis. New production will come from mines La Luz and Plomosas. In terms of reserves, its La Luz mine has solid grades and a sizable estimate. See resource report below.


Its Plomosas mine is based on historic measures, see resource estimate below. Source for this chart can be found on First Majestic's website in projects, or click here.


Source for this chart above chart can be found on First Majestic's website in projects section, or click here.

What I like most about this company is its share structure. Currently, it has 164,980,339 shares outstanding, and on a fully diluted basis it has 176,236,477 shares. For a company this large, I think this is a very fine share structure.

In terms of its financials, its balance sheet is solid with a current ratio of roughly 3.64, and a total assets to total liabilities ratio of roughly 3.64 as well. In 2016, its net income was roughly $8.6 million dollars, which is a drastic turnaround from 2015 were they posted a net income of negative $108 million dollars. They also generated roughly $33.426 million dollars of free cash flow in 2016.

In conclusion, I think this is a strong company and a must for every silver bull. This is a well-run company, with strong financials, production growth, and highly leveraged to silver. I would only say it's a hold at the moment because its valuations aren't cheap. But over the next couple of years I believe this company's share price will trade substantially higher then it is now. I would say this stock is a must buy for any silver bull at $6.50 per share or lower. Just my opinion.

Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in AG over the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.