As of writing this article, Fresnillo Plc (FRES.L) share price is hovering around 760.5. Fresnillo’s share price has been fluctuating in recent months, struggling to maintain support at key levels due to increasing operational costs and declining precious metal prices. According to Bro In Finance’s proprietary machine learning model, which has analyzed data since 2010, combined with macroeconomic factors, we predict that Fresnillo’s stock price will fall to 420 by May 2025.
Here are some of the key information about Fresnillo Plc
Revenue Growth and Profitability
Our analysis shows that Fresnillo’s revenue growth is heavily influenced by two primary factors: fluctuations in metal prices (especially silver and gold) and rising operational costs in mining.
- Silver Production: Fresnillo is the largest silver producer in the world, and it is highly dependent on silver prices, which have seen significant volatility. With global demand for silver expected to decrease slightly due to economic concerns, this could impact the company’s top-line revenue. In recent years, Fresnillo’s silver production volumes have been falling, partly due to lower ore grades and operational inefficiencies.
- Gold Contribution: Gold production remains an important part of the company’s revenue but hasn’t seen the same growth as in previous years. Higher costs of extraction combined with fluctuating prices in the gold market have strained margins.
- Cost Pressures: Inflationary pressures have further eroded Fresnillo’s profitability, as the costs of fuel, equipment, and wages have all increased. This is a major risk factor that could accelerate the downtrend in the stock price. The company’s operating profit margins have been narrowing due to these external pressures, further contributing to potential stock price decline.
Valuation
At Bro In Finance, we follow a market-based valuation method to assess companies like Fresnillo. Traditional DCF methods fail to take into account the market sentiment around commodities, particularly metals like silver and gold, which are highly volatile.
- P/E Ratio: Fresnillo’s P/E ratio is currently hovering around 31, which is slightly above the industry average. Given the declining revenue and increasing costs, we believe the stock may be overvalued by approximately 12% compared to its fair market price.
- Dividend Yield: Fresnillo’s current dividend yield is relatively attractive at around 5%, but with falling revenues, there is a possibility that the company may reduce its dividend payouts in the near future to preserve cash.
In line with our machine learning model’s prediction, we believe the stock will see further downside as these fundamental challenges persist. By May 2025, we expect the stock price to fall to 420, which reflects not only external market conditions but also operational difficulties within the company. Investors should consider the risks and may look for buying opportunities if Fresnillo’s price consolidates at lower levels. RMSE 109.33
Here is the summary of the analysis of Fresnillo Plc,
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