Is SSR Mining a Golden Opportunity?

SSR Mining , like other precious metals mining stocks, tends to rise and fall with the price of gold. Producers of metals exhibit high leverage factors due to the large profit margin swings involved as prices fluctuate. Gold hit an all-time high in early August of 2020, carved out a 52-week low last March. It then ran back up to north of $1,908 on June 2. As of Tuesday, gold has sold off toward the $1,750 range. SSRM broke above $25 last summer as gold ramped up. Its shares were momentarily available on Tuesday, as low as $15.09, before closing to finish at $15.32. Gold's recent decline left it less than 4.7% above its yearly low and more than 15% below last August's peak. Those who like to buy low and sell high might do well to be getting interested in SSRM again. As would be expected, SSRM's profitability varies widely. That can often obscure its longer-term progress. Since 2012, per share sales more than doubled, cash flow more than tripled and earnings surged by over 434%. Cash dividends were initiated this year at a 20-cent annual rate. Best of all, for traders looking to establish new positions in SSRM, the huge value creation is not currently being priced into the stock. A large catch-up move higher appears well overdue. The confluence of gold and SSRM both being near yearly bottoms presents a favorable risk/reward scenario. At $15.24 SSRM is selling for under ten times this year's estimate while yielding 1.31%. A middle of the road valuation based on EPS of $1.55 could easily send the shares back up to $20 - $25 over the coming six to 12 months. That range is not far fetched. SSRM topped out between $19.40 and $25.30 during each of the years 2019 through 2021 year to date. Revenues, cash flow, EPS and dividends have never been higher than they are right now. Any upturn in the price of gold could make my goal price get reset higher. I'm not alone is liking SSRM at today's quote. GuruFocus calls the stock's end of December fair value as $22.45. Reaching that price would deliver a greater than 47% gain. Independent research house Morningstar is only a little less optimistic about SSRM's value. The firm deigns to provide year-ahead targets but does indicate the shares are undervalued. Morningstar's present-day fair value estimate for SSR Mining is $19.83, more than 30% above its Tuesday closing price. FastGraphs' take on these shares is similar, but a tad more aggressive. It sees nearly $25 in the cards for SSRM within six to seven months from today. That would provide a greater than 61% increase while not even requiring the stock to hit its August of 2020 peak. Option-minded traders could consider buying some Jan. 21, 2022 expiration date $15 or $17 call options as way to speculate on a quick bounce back. Break-even prices on those would be $17.15 or $18.35 respectively come expiration day. Any close above those levels would start to generate gains. A more conservative option strategy would be shorting SSRM's Jan. 2022 $15 puts for about $1.90 per share. The worst-case, forced purchase price would drop to just $13.10 ($15 less the $1.90 put premium received). Having to own SSRM at that level should appear quite appealing. It would represent an entry point 4.2% lower than SSRM's 52-week bottom and 14% below the trade inception price of $15.24. Betting on a rising price for gold is not everybody's cup of tea. If you think the Fed's trillions in money printing will lead to higher commodity prices and inflation, though, it seems a reasonable thing to expect. Buy some SSRM shares. Consider buying calls or selling puts out to January 21, 2022 if you're seeking to play SSRM via options.

Is SSR Mining a Golden Opportunity?

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