Assessing Silver Tiger Metals (TSXV:SLVR) Valuation After Its CA$40m Follow On Equity Offering

Silver Tiger Metals (TSXV:SLVR) has filed a follow-on equity offering for about CA$40.0 million, planning to issue 34,189,000 common shares at CA$1.17, a funding move that puts capital structure in focus.

See our latest analysis for Silver Tiger Metals.

Silver Tiger Metals’ latest follow on offering comes after a strong 1 year total shareholder return of 240.00%, alongside a 90 day share price return of 37.84% and a more recent 7 day share price pullback of 19.68%. This suggests momentum has cooled in the short term, while longer term gains remain substantial.

If this type of volatility has your attention, it could be a useful moment to broaden your search and check out fast growing stocks with high insider ownership.

With the share price now below the CA$1.17 offer level and trading at a sizeable discount to the CA$1.70 analyst target, you might be wondering whether there is still a buying opportunity here or whether the market is already pricing in future growth.

Preferred Multiple of 5.6x P/B: Is it justified?

On the latest data, Silver Tiger Metals is described as expensive on a P/B of 5.6x versus the Canadian Metals and Mining industry average of 3.6x. It screens as good value against a peer average P/B of 13.2x and trades at a large discount to both an internal fair value estimate and an analyst target.

P/B compares the market price of the equity to the company’s net asset value, which matters a lot for early stage resource explorers that are still unprofitable. With Silver Tiger Metals currently loss making, traditional earnings based measures such as P/E are less useful, so the market’s focus tends to shift to balance sheet backed metrics like book value.

The data here pulls in two different directions. Relative to the broader Canadian Metals and Mining industry, the 5.6x P/B suggests the market is paying a higher price for each dollar of book value. This can imply high expectations for the El Tigre project or future cash flows. Against a more concentrated peer set, however, that same multiple sits well below the 13.2x peer average, pointing to a lower valuation versus closer comparables even as the company remains unprofitable, has reported increasing losses over five years and has seen substantial shareholder dilution over the past year.

Compared with the industry’s 3.6x, the 5.6x P/B is materially richer. The gap to the 13.2x peer average shows that some similar names trade on far higher balance sheet based valuations. That tension between industry and peer comparisons will matter for investors deciding how much weight to put on book value in the context of forecast revenue growth and the absence of current profits.

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

Result: Price-to-book of 5.6x (ABOUT RIGHT)

However, the company is still loss making with no current revenue, and further shareholder dilution from capital raises could reduce future returns.

Find out about the key risks to this Silver Tiger Metals narrative.

Another View Using Our DCF Model

The SWS DCF model presents a very different picture. At a share price of CA$1.02, Silver Tiger Metals is shown as trading at a large discount to an estimated future cash flow value of CA$9.04, which highlights a wide gap between current market pricing and that model’s output. This raises a simple question for you: is the model too optimistic, or is the market being too cautious?

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 Silver Tiger Metals 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 877 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 Silver Tiger Metals Narrative

If you look at the numbers and reach a different conclusion, or simply prefer to test your own assumptions, you can build a personalised view in just a few minutes with Do it your way.

A great starting point for your Silver Tiger Metals research is our analysis highlighting 2 key rewards and 3 important warning signs that could impact your investment decision.

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If you have read this far, you are clearly serious about making thoughtful decisions, so do not leave potential ideas on the table when they are this easy to scan.

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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