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Alberto Abaterusso
Alberto Abaterusso
Articles (2616) 

Why You Should Have Endeavour Silver in Your Portfolio

The silver miner promises to deliver higher output at a lower cost

February 27, 2020 | About:

Silver price outlook

The price of silver is trending up. The precious metal metal traded at $17.834 per troy ounce on the Comex futures market and at $18.075 per troy ounce on the London bullion market at close on Wednesday, reflecting a 13% rise year over year, driven by easing monetary policies implemented by central banks worldwide.

These policies were globally implemented to stimule economies whose growth was flagging, which was exacerbated by the trade conflicts between the United States and China.

Looking forward, analysts see silver trading at over $19 an ounce before the end of 2020, mainly as a result of higher investments in silver coins, bars and exchange-traded products (aka ETPs).

The positive effects on the price of the commodity are expected to be so strong that they will more than offset a potential contraction in the industrial usage of the metal, should macroeconomic uncertainties discourage the demand.

Investors often consider silver coins, bars and ETPs as safe-haven assets which offer protection against elevated volatility due to macroeconomic uncertainties and trade conflicts.

Endeavour Silver Corp

Investors seeking consistent capital gains may want to take advantage of the next rally in the price of silver by purchasing shares of Canadian mid-tier miner Endeavour Silver Corp (NYSE:EXK).

Endeavour Silver Corp (NYSE:EXK) is a mid-tier miner of silver from three high ore grade underground deposits located in Mexico.

Thanks to remedial actions carried out last year through the entire assets base, Endeavour promises that in 2020 it will reach higher production at a lower cost than in 2019, when 7.13 million ounces of silver equivalent were produced at all-in sustaining costs of $21.19 per ounce of metal.

Last year was challenging year for the company, as it had to deal with several operating issues which caused operations to underperform. On a year over year basis, this determined a worsening in all its financial headlines. Despite higher precious metals prices, total revenue fell 19% to $121.7 million and net loss increased 186% to $48.1 million. Also, the earnings before interest, taxes, depreciation and amortization (aka Ebitda) switched to a negative $11 million and the operating cash flow shifted to a negative $9 million.

As a result of higher silver prices and sales volumes, the above items are therefore expected to improve this year, producing positive repercussions on the share price of the stock.

Currently, the share price ($1.78 as of Feb. 26) is not expensive, as it trades significantly below the 200-, 100- and 50-day simple moving average lines. It is also well below the middle point of the 52-week range of $1.68 to $3.20.

The price-book ratio is 2.05 versus the industry median of 1.5 and the enterprise value-Ebitda ratio is negative 20.68 compared to the industry median of 8.94.

The 14-day Relative Strength Indicator of 32 suggests that the stock is near oversold levels.

As of February, three Wall Street sell-side analysts recommend buying shares of Endeavour Silver Corp, five analysts suggest holding the shares and one analyst says to sell.

The average target price is $2.41 per share, which reflects a 35.4% upside from Wednesday’s closing price.

Disclosure: I have no positions in any security mentioned.

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About the author:

Alberto Abaterusso
I am a contributor at GuruFocus. I primarily write about how to pick potential value stocks. Gold, silver and precious metals mining industries is also my cup of tea. My articles have also been widely linked by popular sites, including MarketWatch, Financial Times, 24hGold, Investopedia, Financial.org, CNBS, MSN Money, Zachs, Reuters and others. I hold a Master\\\'s Degree in Business Administration from Università degli Studi di Bari (Italy), Aldo Moro. I am based in The Netherlands.

You can follow me on Twitter at https://twitter.com/AAbaterusso

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