Evaluating Mako Mining’s Valuation After Moss Mine Resource Update And Silver Stream Removal

Updated Moss Mine resource estimate puts new focus on Mako Mining

Mako Mining (TSXV:MKO) has attracted fresh attention after releasing an updated mineral resource estimate for its Moss Mine Gold Project in Arizona. The update highlights new gold and silver figures and the removal of a previous silver stream.

See our latest analysis for Mako Mining.

The updated Moss Mine resource comes after a strong run for the company, with a 30 day share price return of 22.24% and a very large 3 year total shareholder return of 398.97%. However, the 1 day and 7 day share price returns of 5.07% and 2.70% declines suggest some of that momentum has cooled in the immediate aftermath of the news.

If this kind of project update has your attention, it could be a good moment to widen your search and check out fast growing stocks with high insider ownership as potential next ideas.

With Moss moving toward steady production and the silver stream gone, Mako is trading at a significant intrinsic discount. The key question for you is whether that signals a genuine opportunity or if the market is already pricing in future growth.

Price to earnings of 25.8x: Is it justified?

On a P/E of 25.8x, Mako Mining trades at a richer earnings multiple than both the Canadian Metals and Mining industry average of 24.8x and its peer group on 14.4x. That sits alongside the SWS DCF model, which suggests the shares, at CA$9.73, are trading at a large discount to an estimated future cash flow value of CA$28.99.

The P/E ratio compares the current share price to earnings per share, so you are effectively seeing how much the market is willing to pay for each dollar of current earnings. For a gold miner like Mako, this often reflects how investors view the quality and sustainability of its earnings and how they weigh the Moss Mine resource base against recent financial performance.

Here, the tension is clear. On one hand, the company is described as having high quality earnings and a high 24.6% return on equity, and it has become profitable over the past 5 years with strong historical earnings growth. On the other hand, earnings growth over the last year was 0.4%, below both its own 5 year average and the broader Metals and Mining industry, while the entire funding base currently comes from higher risk external borrowing and there has been significant insider selling over the past 3 months. That combination can help explain why the market is willing to pay a premium P/E for today’s earnings while the DCF model points to a large gap between price and estimated cash flow value.

Compared with the industry, Mako’s 25.8x P/E is higher than the 24.8x average and well above the 14.4x peer average. This suggests the market is assigning a relatively full price to the company’s current earnings power. If the business were to track more closely with the peer group on this measure over time, that gap would narrow, either through changes in earnings, changes in the share price, or a mix of both.

See what the numbers say about this price — find out in our valuation breakdown.

Result: Price to earnings of 25.8x (OVERVALUED)

However, you still need to weigh risks such as funding entirely through external borrowing and the recent insider selling, which could challenge any positive market narrative.

Find out about the key risks to this Mako Mining narrative.

Another view on value

While the P/E of 25.8x makes Mako Mining look expensive against the Canadian Metals and Mining industry on 24.8x and peers on 14.4x, our DCF model points the other way. At CA$9.73, the shares sit well below an estimated future cash flow value of CA$28.99. This raises a simple question: which signal do you trust more, earnings today or projected cash flows?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Mako Mining for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 875 undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match – so you never miss a potential opportunity.

Build Your Own Mako Mining Narrative

If you see the numbers differently or simply prefer to work through the data yourself, you can build a personalised view in just a few minutes with Do it your way

A great starting point for your Mako Mining research is our analysis highlighting 2 key rewards and 1 important warning sign that could impact your investment decision.

Looking for more investment ideas?

If Moss has sharpened your focus, do not stop with one name. Use the Simply Wall St Screener to spot other opportunities before they move without you.

This article by Simply Wall St is general in nature. We provide commentary based on historical data
and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your
financial situation. We aim to bring you long-term focused analysis driven by fundamental data.
Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
Simply Wall St has no position in any stocks mentioned.

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