Is First Majestic Silver a Buy After Their Latest Earnings Report?

First Majestic Silver (NYSE: AG) recently reported its first-quarter results. The silver mining company delivered surging revenue and profitability, driven by significantly higher silver and gold prices. Those higher prices more than offset the impact of lower production and higher costs.

Here's a look at whether the silver stock is a buy after its earnings report.

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Another record quarter

First Majestic Silver achieved record quarterly revenue of $476.7 million, a 95% increase from the first quarter of last year. That's its fifth straight quarterly revenue record. Overall, 66% of its revenue came from silver, the highest percentage in its peer group.

Meanwhile, the company's adjusted net earnings rocketed from $20.9 million in the first quarter of last year to $151.7 million in the first quarter of this year. First Majestic Silver also delivered a 182% increase in its cash flow from operations to $310.6 million and generated $223.5 million in free cash flow, up from $43.5 million last year. The company's strong cash flows enabled it to strengthen its balance sheet to a record $1.1 billion treasury position, up 20%, while also increasing its quarterly dividend by 280%. First Majestic's new dividend policy is to pay out 2% of its net quarterly revenues.

The company's revenue and profits surged even though its silver and gold production declined by 4% and 6%, respectively, due to lower grades milled. First Majestic also experienced a significant uptick in costs -- its all-in sustaining cost per silver ounce equivalent rose 55% -- due to higher variable costs, including royalties and worker production bonuses. It more than offset the headwinds from higher costs and lower production, thanks to higher silver and gold prices.

What's ahead for the silver miner

While silver and gold prices have surged over the past year, they've come down from their peaks. Silver has rocketed more than 150% over the last year to around $85 an ounce, though that's well below its height of nearly $122 an ounce. Meanwhile, gold surged nearly 45% to its recent level of around $4,700 an ounce, though that's down from its 52-week high of more than $5,625 an ounce.

Investor demand for precious metals has surged due to inflationary and geopolitical concerns. Additionally, silver is also benefiting from increased industrial demand. It's a vital metal for the solar energy industry and plays a crucial role in supporting AI due to its usage in chips, servers, switches, and robotics. Meanwhile, there's currently a deficit in the silver market between supply and demand. These catalysts should keep silver prices high, especially since there aren't enough new silver mines coming online to boost supply.

First Majestic expects its costs to fall in the second half of this year, positioning it to deliver stronger profitability if prices remain high. It has also delivered numerous positive exploration results across its portfolio, positioning it to continue supplying silver to an undersupplied market.

Meanwhile, First Majestic is looking to capitalize on higher gold prices by restarting production at its Jerritt Canyon Gold Mine. It plans to invest $75 million this year to support the mine's restart, which it placed in care and maintenance in early 2023 when gold prices were much lower. The company aims to resume production at Jerritt Canyon next year.

Is First Majestic Silver a buy?

Shares of First Majestic Silver have rocketed more than 300% over the past year due to surging silver and gold prices. The silver miner has more upside potential if silver and gold prices remain high. However, at about 20 times forward earnings, First Majestic Silver trades at a premium to most of its silver-focused peers. As a result, you might want to wait for a lower price before buying First Majestic, unless you have a very high conviction that silver prices will continue soaring.

Matt DiLallo 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.