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Southern Copper (SCCO) Slips Despite Record Results, Is The Premium Still Justified?

Simply Wall St · 2d ago

Southern Copper (SCCO) just delivered record third quarter sales and net income, yet the share price dropped as copper futures weakened and investors questioned the stock's premium valuation and long term earnings outlook.

Southern Copper’s recent pullback tells the story. The share price has fallen 7.7% over the past week and 8.4% over the past month, yet the year to date share price return is 28.3% and the 1 year total shareholder return is 52.0%, which indicates longer term momentum that now appears to be cooling as investors reassess premium pricing against softer copper futures and execution risks on large growth projects.

Compare Southern Copper’s premium pricing and copper exposure against a hand picked group of 16 top copper producer stocks to see how this pullback stacks up across the sector.

Southern Copper now trades slightly above the average analyst target and at a steep premium to many copper peers after this pullback. The real puzzle is where fair value falls inside that wide spread of estimates.

Most Popular Narrative: 6% Overvalued

Southern Copper last closed at $185.01, while the most followed narrative pegs fair value at $175.30 using an 8.9% discount rate. This frames the recent pullback as a move from very rich territory rather than a clear bargain.

The numbers indicate that the current share price reflects an assumption that Southern Copper can turn its recent margins, capital spending, and projected copper volume growth into sustained long term value. This may be a demanding expectation for a bearish narrative that views the stock as overvalued.

See why 54 investors see Southern Copper as 6% overvalued.

Result: Fair Value of $175.30 (OVERVALUED)

Still, two big swing factors could upend that overvalued call if they break right for Southern Copper: smoother delivery on the Peru and Mexico project pipeline, and copper prices that stay stronger than cautious scenarios assume.

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

Next Steps

Sentiment on Southern Copper is clearly split, so consider acting while the debate is fresh and weigh the upside against the weak spots using 1 key reward and 1 important warning sign.

Looking for more investment ideas beyond Southern Copper?

If Southern Copper has you thinking harder about risk, value, and income, then broadening your watchlist with fresh ideas can sharpen your next move.