3 Reasons SSR Mining Stock Is Undervalued Right Now
Key Points
Gold prices have surged significantly over the past few years -- and that's a boon to precious metals miners.
SSR Mining has sharply increased its mineral reserves and expects to increase production by 10% this year.
The stock trades at a cheap forward valuation, and management recently approved a share buyback program.
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Gold prices have surged in recent years, reaching over $5,500 per ounce a little over a month ago. While prices have cooled since then, rising geopolitical tensions and government spending suggest gold prices could remain elevated, creating an opportunity for investors looking to buy gold miners.
For investors looking to capitalize on rising commodity prices, SSR Mining (NASDAQ: SSRM) could be an undervalued stock to consider. Here's why.
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1. Rising gold production will boost cash flow
Gold prices have nearly tripled over the past three years, showing incredibly strong demand for the precious metal. According to the World Gold Council, demand for gold hit a record high, exceeding 5,000 tonnes for the first time ever last year, as investors and central banks piled into the precious metal.
SSR Mining, which is based in Denver, Colorado, has been steadily increasing its mineral reserves over the past several years, growing 34% since 2020 to 11 million gold equivalent ounces through acquisitions and resource development. Looking forward to this year, the company projects a 10% increase to 450,000 to 535,000 gold equivalent ounces, thanks to robust production across its American-based assets. This growing production should drive substantial cash flow generation.
2. Its valuation is cheap, and could rerate higher if gold remains elevated
For investors looking to capitalize on the surge in gold, mining stocks offer a leveraged bet on the commodity. That's because minor stock prices are driven by profit margins, which can expand disproportionately when gold rises. Because a miner's extraction costs don't scale 1-to-1 with gold prices, a higher selling price translates directly into disproportionately higher bottom-line profits.
Image source: Getty Images.
On a valuation basis, SSR Mining looks quite compelling. The company earned $1.65 per share last year and is priced at around 16.1 times those earnings. Looking forward to 2026, analysts project the company could generate $4.46 in EPS, giving it an extremely cheap forward valuation of just 6 times earnings.
While miners have historically traded at low multiples, surging gold prices could lead to a sectorwide rerating. If investors believe high gold prices are the new normal, they may be willing to pay a higher multiple for those earnings, leading to a higher valuation and stock price.
3. Its recent sale strengthens its balance sheet
In March, SSR Mining signed a binding agreement to sell its 80% stake in the Çöpler mine for $1.5 billion in cash. Selling its stake in the mine, which had been shut down by regulators following a fatal 2024 accident, reduces SSR Mining's exposure to emerging markets while the company focuses on more developed-market assets. The company expects to close the sale by the third quarter this year.
The sale is a huge cash windfall for a company that generated $1.6 billion in revenue last year, and will give its balance sheet a big boost. In addition to increased production, the boost in cash can be used to fund share buybacks, dividends, or other expansion projects. SSR Mining's board approved a $300 million share buyback program, enabling it to repurchase outstanding shares and further boost earnings per share.
Is SSR Mining right for you?
For SSR Mining, rising gold prices are a boon to earnings. However, investors should be aware of the risks, including rising input prices, such as oil or labor prices, which could increase the costs of mining. There are also operational risks, including potential mine accidents or geopolitical issues, which is why the sale of a stake in the mine in Turkey was viewed as a positive development.
That said, analysts covering the stock project a massive 57% surge in revenue, to $2.56 billion, along with a 140% increase in earnings per share. The stock has recently pulled back 20% amid broader market volatility, making SSR Mining an appealing stock at a cheap valuation for investors looking to capitalize on the surge in gold prices.
Should you buy stock in SSR Mining right now?
Before you buy stock in SSR Mining, consider this:
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Courtney Carlsen has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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