Russia continues to step up military pressure on Ukraine, despite the sanctions imposed by other countries on its finances and those of President Vladimir Putin and his oligarch friends. This situation fuels fears about the development of the conflict between Russia and Ukraine and, as we see today, this war could last for a very long time.
Markets are affected as the Dow Jones is down 150 points, while the S&P500 and Nasdaq are slightly in negative territory as of the time of writing.
But it is not only the geopolitical crisis in Eastern Europe that determines the pessimistic sentiment reigning in the market. On top of this, concerns about a more aggressive interest rate hike by the U.S. Federal Reserve to counter high inflation are now causing investors to flock toward safe-haven assets such as gold and silver.
As uncertainty remains high, demand for silver should continue to rise for hedging purposes. To benefit from the expected rise in precious metal prices (silver futures for 2022 are around $25 an ounce at the time of writing, up almost 3% over the last week), investors should consider the U.S. traded silver exploration and mining companies. Typically, these stocks tend to rise faster than silver while bullish sentiment prevails in the market.
Endeavour Silver Corp. (EXK, Financial) represents an interesting opportunity as this mid-tier silver equivalent producer is poised to ship higher ounces of gray metal thanks to strong execution being carried out from one of its Mexican properties, the Durango mine in Guanacevi.
At the Guanacevi deposit, miners have intersected fairly continuous and productive precious metal veins. This allows the extraction of ores with increased concentrations of precious metals, while the shape of the ore body and the location of the extraction activities are allowing more efficient management of the mill.
Endeavour Silver's other asset, the Bolanitos field located in the province of Guanajuato in Mexico, is also exceeding expectations in terms of silver production.
But it is largely thanks to Guanacevi that Endeavour Silver was able to beat the upper bound of its silver equivalent production forecast for 2021 (7.7 million to 8 million) and bring 8.3 million ounces to market.
Endeavour Silver is also producing gold ounces from its reserves which are being delivered in line with the company's highest forecasts despite some operational issues in Mexico.
Maintaining its mineral assets in Mexico and advancing a metals project in Chile requires a strong financial position, which is in place as of the time of writing. This is backed by an interest coverage ratio of 24 (fully able to pay the interest cost on all debt), an Altman Z-Score of 9.2 (safe zone, meaning no risk of bankruptcy) and a Piotroski F-Score of 7 out of 9 (solid operations). Also, the current ratio of 5 indicates sufficient working capital is being generated to meet short-term needs.
The share price was $4.58 in early trading on Tuesday for a market cap of $779.01 and an enterprise value-Ebitda ratio of 11.61 (versus the industry median of 8.89).
The share price looks cheap compared to past valuations as it is below the midpoint ($5.56) of the 52-week range of $3.35 to $7.76 and below the 200-day moving average of $4.9491.
The 14-day relative strength index of 63 indicates the stock is neither overbought nor oversold.
Wall Street issued an overweight median recommendation rating with an average price target of $5.64 per share.
At these prices, Endeavour Silver presents an interesting opportunity to take part in the next silver bull market.
