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Southern Copper (SCCO) Could Be 13% Overvalued On Its Growth Spending Narrative

Simply Wall St · 2d ago

Southern Copper (NYSE:SCCO) is back on investor radar after recent trading left the stock roughly flat over the past month, yet it still carries a sizeable year to date and 1 year total return profile.

In the short term, Southern Copper’s share price has eased, with a 7 day share price return of down 9.26% and a 30 day share price return of down 1.12%. However, the year to date share price return of 31.64% and 1 year total shareholder return of 88.81% signal momentum built over a longer stretch.

Compare Southern Copper’s recent run to other copper-focused plays by scanning our curated list of 29 top copper producer stocks for potential momentum and diversification ideas in the same theme.

Southern Copper has produced hefty long term returns and runs a broad copper mining footprint across the Americas. After such a strong run, the real puzzle is whether the current price still stacks up on valuation grounds.

Most Popular Narrative: 13% Overvalued

On Simply Wall St’s most followed narrative, Southern Copper screens as overvalued, with a fair value estimate of $167.79 against a last close of $189.88. This puts the focus squarely on what needs to go right to support that premium.

Southern Copper has announced substantial capital investments totaling over $15 billion, including projects in Mexico and Peru, which are expected to drive future production growth and potentially boost revenue significantly.

The company's Buenavista zinc concentrator is now operating at full capacity, anticipated to drive a 31% increase in zinc production in 2025, likely enhancing revenues and improving net margins due to efficient operations.

See why 50 investors see Southern Copper as 13% overvalued.

The widely followed narrative applies an 8.71% discount rate and arrives at that $167.79 fair value, while the stock trades at a clear premium to this internal figure. That gap reflects the market paying up for Southern Copper’s current earnings power and capital program, over and above what the model’s revenue growth and margin assumptions support on a discounted basis.

For investors, the key question is whether those planned projects and cost efficiencies eventually close the distance between today’s $189.88 share price and the $167.79 fair value anchor, or whether sentiment has moved ahead of the underlying cash flow story priced into the model.

Result: Fair Value of $167.79 (OVERVALUED)

Still, U.S. and China trade frictions, along with a more than US$15b capex program, could squeeze Southern Copper’s cash flow and unsettle the current valuation story.

Find out about the key risks to this Southern Copper narrative.

Next Steps

Sentiment on Southern Copper is mixed, which is exactly why it helps to review the data yourself and decide what you think before the crowd does. To see both sides of the story in one place, take a look at the 2 key rewards and 1 important warning sign.

Looking for more investment ideas beyond Southern Copper?

Do not stop your research with Southern Copper alone. Broaden your watchlist with other opportunities that match your goals and risk comfort.

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.