First Majestic Silver's Elevated Valuation in Today's Precious Metals Market

First Majestic Silver Corp. (AG) finds itself in an intriguing position within the precious metals sector. While the majestic market for silver and gold continues to attract investor attention, AG’s stock valuation presents a mixed picture for prospective shareholders.

Pricing and Market Positioning

Currently, AG is commanding a forward 12-month P/E multiple of 55.84X, significantly outpacing the Mining - Silver industry average of 20.03X. This premium valuation sits well above the company’s own five-year median of 29.91X, raising questions about sustainability. When stacked against peers, the gap becomes even more apparent: Hecla Mining Company (HL) trades at 41.03X while Pan American Silver Corp. (PAAS) sits at a more modest 15.25X. With a Value Score of F, AG stock’s current price levels appear stretched relative to traditional valuation metrics.

Recent Performance in the Majestic Market for Metals

Over the past three months, AG gained 29.4% as the broader Mining - Silver industry climbed 36.1%—outpacing the S&P 500’s 6.4% return. However, this masks an underperformance story when compared to key rivals. Hecla Mining and Pan American Silver delivered returns of 56.2% and 33.5% respectively during the same window, suggesting that investors have favored competitors in this precious metals cycle.

Production and Operational Highlights

The company’s Q3 2025 results delivered some bright spots. Total production reached 7.7 million silver-equivalent (AgEq) ounces, marked by record quarterly silver output of 3.9 million ounces alongside 35,681 gold ounces. Secondary metals contributed 13.9 million pounds of zinc and 7.7 million pounds of lead. This AgEq output surged 39% year-over-year, driven by a remarkable 96% jump in silver ounces, demonstrating operational momentum in the majestic market environment.

Financial Health and Capital Position

Free cash flow generation impressed, with Q3 cash flow reaching $98.8 million, a 67.5% year-over-year surge. Liquidity expanded to $682 million, supported by record working capital of $542.4 million. These metrics suggest operational efficiency is translating to tangible financial strength. However, consolidated debt climbed to $216.8 million by quarter-end—a 3.5% year-over-year increase—which tempers some optimism regarding long-term financial sustainability.

Headwinds Challenging the Investment Thesis

Cost pressures remain a persistent issue. In the first nine months of 2025, cost of sales jumped 52.8% year-over-year to $390 million, while general and administrative expenses rose 27.3% to $35.9 million. Factors driving these increases include higher production volumes, elevated labor costs, increased selling expenses, and integration charges from acquisitions like Gatos Silver.

Mexico-specific regulatory challenges present another layer of complexity. With four operating mines in the country—Santa Elena, Los Gatos, San Dimas, and La Encantada—AG faces ongoing legal disputes with Mexican authorities regarding taxation. While these assets maintain solid production profiles, the regulatory uncertainty creates both financial and operational risks.

Market Dynamics Supporting Silver and Gold

Silver prices have strengthened substantially over the past year, underpinned by safe-haven buying, geopolitical tensions, and trade uncertainty. Industrial demand for solar applications, electronics, and electrification now represents over half of global silver consumption. Supply-demand imbalances have further supported pricing, providing tailwinds for producers like AG operating within the broader majestic market.

Earnings Trajectory and Valuation Outlook

The Zacks Consensus Estimate for 2025 earnings holds steady at 25 cents per share over the past 60 days. However, 2026 projections have weakened, with consensus declining 2.9% to 34 cents per share. This downward revision activity, combined with elevated valuation multiples, suggests caution may be warranted.

Final Assessment

First Majestic brings credible assets to the table: market leadership credentials, geographic and product diversification, and solid liquidity reserves. These factors position the company to capture long-term demand in the precious metals majestic market. Nevertheless, mounting operational costs, Mexican regulatory headwinds, and rising debt levels present genuine obstacles. The combination of expensive valuation and declining earnings estimates places AG at a Zacks Rank #4 (Sell) rating. Existing shareholders should adopt a watchful stance, while potential investors may benefit from waiting for clearer signs of operational improvement and valuation normalization before committing capital.