Should PAAS Stock be a Part of Your Portfolio Post Solid Q2 Results?

Pan American Silver PAAS has gained 10% since it reported solid second-quarter 2025 results, delivering year-over-year increases in both its top and bottom lines. PAAS beat the Zacks Consensus Estimate on both metrics. The company also reported record free cash flow of $233 million, leading to a record high cash balance of $1.1 billion at the end of the quarter.

Year to date, PAAS shares have gained 58.3%, outpacing the industry's 52.1% growth. In comparison, the Basic Materials sector has risen 14.5%, while the S&P 500 has moved up 9.5%.

Pan American Silver has also outscored Endeavour Silver Corp. EXK and Hecla Mining Company HL, which have gained 57.1% and 56.2%, respectively, year to date.

PAAS Stock's YTD Performance vs. Endeavour Silver & Hecla Mining

Pan American Silver stock is trading above its 50-day and 200-day moving averages, indicating solid upward momentum and price stability. This reflects a positive market sentiment and confidence in the company's financial health and long-term prospects.

Before addressing the critical question of how investors should position themselves regarding the stock, let us first review the company’s second-quarter results.

Digging Deeper Into Pan American Silver’s Q2 Results

The company reported revenues of $811.9 million, reflecting an 18% year-over-year growth attributed to higher gold and silver prices. It was partially offset by an $80.5 million decrease in the quantities of metal sold, reflecting the disposition of La Arena, as well as lower production at Dolores, El Peñon, Timmins and Minera Florida.

Mine operating earnings surged 134% to $273 million on lower production costs. Adjusted earnings per share were 43 cents, marking a solid 291% jump from the year-ago quarter. 

The company reported record cash flow from operations after non-cash working capital changes of $293.4 million, net of $68.3 million in cash taxes paid. Free cash flow was also a record $233 million. Pan American Silver announced a 20% dividend hike to 12 cents per share.

PAAS Expects Stronger Output in the Later Part of 2025

PAAS produced 5.1 million ounces of silver and 178.7 thousand ounces of gold in the second quarter.  The company remains on track to meet its 2025 guidance of 20-21 million ounces of silver and 735,000-800,000 ounces of gold, with output expected to rise in the fourth quarter of the year.

Acquisition of MAG Silver to be a Catalyst for Pan American Silver

In May, Pan American Silver inked a deal to acquire MAG Silver Corp. MAG for $2.1 billion. Through this move, PAAS will gain access to the large-scale, high-grade Juanicipio mine in Mexico, in which MAG Silver has a 44% stake. The company also sees growth opportunities through the significant exploration potential at Juanicipio, as well as MAG Silver’s Deer Trail and Larder properties.

The deal, expected to close in the second half of 2025, will position Pan American Silver as a leading Americas-focused silver producer. Juanicipio is expected to increase its silver production by roughly 35% on an annualized basis and meaningfully reduce all-in sustaining costs.

Rising Estimates Instill Confidence in PAAS Earnings

The Zacks Consensus Estimate for Pan American Silver’s earnings for 2025 and 2026 has moved up 22.98% and 25.93%, respectively, over the past 60 days.

The consensus mark for 2025 earnings is pegged at $1.98 per share, indicating a year-over-year surge of 150.6%. The estimate for 2026 of $2.38 indicates an increase of 20.2%.

Pan American Silver Positioned for Long-Term Growth

PAAS has solidified its position as a leading precious metal producer in the Americas with a diversified asset base. The company has been rationalizing its portfolio following the Yamana acquisition (in 2023), strategically investing in its producing mines while advancing organic opportunities.

Notable achievements include ventilation upgrades at its La Colorada silver mine in Mexico, which enabled a 51% increase in silver production and an 18% reduction in all-in-sustaining costs (AISC) in the second half of 2024 compared with the first half. 

PAAS completed the construction of a new filter plant and filter-stack tailings storage facility at its Huaron mine in Peru, providing additional capacity while enhancing environmental performance. At the Timmins operation in Canada, the company completed the construction of a paste backfill plant at the Bell Creek mine. That plant is now fully operational and is expected to provide enhanced ground stability and increased mineral resource recovery.

Pan American Silver remains focused on progressing initiatives to further increase shareholder value, including the optimization study for Jacobina and the development of the La Colorada Skarn.

Pan American Silver’s Valuation is Attractive

PAAS is currently trading at a forward 12-month price-to-earnings multiple of 14.44X, at a discount to the industry average of 17.49X. 

In comparison, Endeavour Silver and Hecla Mining trading higher at 17.56X and 25X, respectively.

Our Final Take on PAAS Stock

Pan American Silver is well-positioned to capitalize on the ongoing rally in gold and silver prices, along with its strong production outlook. The planned acquisition of MAG Silver and continued investment in growth initiatives strengthen its long-term prospects. Considering its valuation and upbeat earnings growth projections, PAAS is a solid stock to own. 

The stock’s Zacks Rank #1 (Strong Buy) supports our thesis. You can see the complete list of today’s Zacks #1 Rank stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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