Is Coeur d’Alene’s Stock a Buy After Its Precipitous Drop?

With shares of Coeur d’Alene Mines Corporation (NYSE:CDE) trading at around $23.26 is CDE an OUTPERFORM, WAIT AND SEE, or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

C = Catalyst for the Stock’s Movement

Coeur d’Alene has been a volatile stock over the past five years. The only great entry point during that timeframe was late 2008 when it was trading below $5. If you bought at that time, then you did quite well. Finding another entry point over the past five years hasn’t been easy. The stock has hit $15 on several occasions. Those have proven to be the best entry points since January of 2010, but who has that kind of timing?

The shorts are lurking here. The short percentage of the float is at 6.40%. That’s much higher than the short position of 2.60% on competitor Newmont Mining (NYSE:NEM). Newmont Mining also offers a 3% yield while Coeur d’Alene offers no yield. Coeur d’Alene does win on the balance sheet, though, which we will cover further below.

From a business standpoint, the macro picture has been looking good at Coeur d’Alene, but there have been some bumps along the way. For instance, San Bartolome was shut down for several days in August due to power trouble. This led to poor production and increased costs. 76 Clavo at Palmarejo has seen disappointing production due to unexpected underground problems (these problems are claimed to be temporary.) On the positive side, Rochester and Kensington have been performing well. Outstanding debt has also been reduced by $100 million over the past year. Want more numbers?

Coeur d’Alene has produced 14.2 million ounces of silver and 165,000 ounces of gold over the past nine months. For 2012, they expect to produce a total of 18.5 to 19 million ounces of silver and between 215,000 and 225,000 ounces of gold. There has been no guidance on 2013 yet…

E = Equity to Debt Ratio is Strong

Coeur d’Alene has a debt-to-equity ratio of .03. This is stronger than Newmont Mining’s debt-to-equity ratio of .38. More importantly, Coeur d’Alene has $134.57 million in cash and only $61.39 million in debt. Newmont Mining has $1.64 billion in cash and $6.12 billion in debt.

T = Technicals on the Stock Chart Are Unexceptional  

Coeur d’Alene has underperformed the S&P 500 for the majority of the past three years.

Over the past month, Coeur d’Alene is down 23.16% while the S&P 500 is up .59%. Year-to-date, Coeur d’Alene is down 3.65% while the S&P 500 is up 14.94%. Over the past calendar year, Coeur d’Alene is down 20.53% while the S&P 500 is up 21.16%. Over the past three years, Coeur d’Alene is up 1.97% while the S&P 500 is up 38.19%.

At $23.26, Coeur d’Alene is significantly lower than its 50-day SMA of $27.30. It’s trading close to its 100-day SMA of $23.68. And it’s trading slightly higher than its 200-day SMA of $22.57. As you can see, this isn’t a stock for those who like to spend their lives in the right lane. If you want to trade CDE, then you better be capable of zigging and zagging at a moment’s notice. A long-term investment in Coeur d’Alene is different, which will be covered below.  

E = Earnings Are Steady and Revenue Is Very Impressive

The annual revenue growth for Coeur d’Alene tells a very important story, which is one of significant progress.

2007

2008

2009

2010

2011

Revenue ($)in millions

194.72

129.28

300.36

515.46

1.021B

Diluted EPS ($)

1.42

-.01

-.38

-1.05

1.04

 

Coeur d’Alene’s last quarter certainly could have been better, but investors are hoping it was just a glitch in the matrix.

9/2011

12/2011

3/2012

6/2012

9/2012

Revenue ($)in millions

343.58

246.91

204.56

254.41

230.59

Diluted EPS ($)

.35

.12

.04

.26

-.18

 

T = Trends Partially Support the Industry

When it comes to mining, it’s impossible to predict a trend. What happens underground is highly unpredictable. Fortunes can change overnight from one company to the next. In most cases, improved production and disappointments have short-term effects on an individual company.

On one hand, stating that there is any form of trend in this industry would be unfair. On the other hand, ever since quantitative easing has gone into effect, commodity prices have skyrocketed. We’re likely on the tail end of this trend, so use caution.

Conclusion

Over the past five years, Coeur d’Alene has underperformed Newmont Mining, Silver Wheaton (NYSE:SLW) and the iShares Silver Trust (NYSEARCA:SLV). Justifications will be attempted, but in simplest terms, that’s called losing.

On the bright side, Coeur d’Alene has a lot of potential. The annual revenue growth alone is proof that this company is heading in the right direction.

Coeur d’Alene has good potential, but there are better options out there. At the current time, Coeur d’Alene is a WAIT AND SEE.

Using a solid investing framework such as this can help improve your stock-picking skills. Don’t waste another minute — click here and get our CHEAT SHEET stock picks now.