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Result: OVERVALUED

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Southern Copper.

Our Discounted Cash Flow (DCF) analysis suggests Southern Copper may be overvalued by 165.2%. Find undervalued stocks or create your own screener to find better value opportunities.

The Price-to-Earnings (PE) ratio is the preferred valuation tool for profitable companies because it directly connects a company’s share price with its actual ability to generate earnings. Investors can quickly gauge how much they are paying for each dollar of profit, providing a simple litmus test for whether a stock appears reasonably priced or not.

However, what qualifies as a “normal” or “fair” PE ratio depends on several moving parts. Companies expected to grow faster, or with a lower risk profile, tend to command higher PE ratios, while those facing headwinds or greater uncertainty should trade at lower multiples. So, it is important to not look at Southern Copper’s PE in isolation.

Southern Copper currently trades on a PE of 29.1x, which is notably higher than both the industry average of 25.2x and its closest peers at 23.5x. However, simply comparing to peers or industry averages can miss the bigger picture. This is where Simply Wall St’s Fair Ratio comes in. The Fair Ratio is tailored to the company’s specific prospects, factoring in its earnings growth outlook, market position, profit margins, size, and risk profile. This leads to a more balanced reference point for valuation. For Southern Copper, the Fair Ratio is 26.5x. Since the current PE is higher than this fair multiple, the stock appears richly valued based on earnings.

Result: OVERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Earlier we mentioned there is an even better way to understand valuation, so let us introduce you to Narratives. Narratives are a smarter, more dynamic way to make investment choices by going beyond the numbers and telling your perspective or story about a company. This approach links its latest business developments, industry trends, and future plans directly to your own forecasts of revenue, earnings, and margins.

With Narratives on Simply Wall St’s Community page, millions of investors can easily connect the dots from a company’s story, through a financial forecast, to an up-to-date fair value estimate. Narratives help you decide whether to buy, hold, or sell by automatically comparing your fair value to the current share price. Because they update whenever key news or earnings are released, your opinion is always based on the most relevant information available.

For example, one Southern Copper Narrative might emphasize major expansion projects and rising metal prices, resulting in a fair value above $130. In contrast, a more cautious Narrative could focus on cost challenges and geopolitical risks, suggesting a fair value closer to $67. Narratives allow you to flexibly express your own investment thesis and see how it compares to the community, making analysis more insightful and actionable than ever before.

Do you think there’s more to the story for Southern Copper? Create your own Narrative to let the Community know!

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.

Companies discussed in this article include SCCO.

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