A-Mark Precious Metals: About To Be 3x TTM Earnings And Set To Benefit From 'Silver Squeeze'

Highlights

• A year ago, I wrote a piece identifying A-Mark as a misunderstood business on the verge of a turnaround.

• After Covid hit, the story accelerated, with the business having earned $7.60/share in the TTM period, essentially the share price from a year ago.

• Earnings appear to be accelerating rather than slowing down. Recent silver market volatility has pushed spreads to new heights.

Brief Commentary

In early 2020, A-Mark Precious Metals (NASDAQ:AMRK) was trading around $8, having earned minimal profits in prior years and looking like a busted spinoff. But a layer deeper was a business that was waiting for market volatility to shine.

In my prior article, I speculated that AMRK could earn $3-4 per share during a business upcycle. Well, in Q1, they earned over $3/share in a quarter.

While not as cheap as it was a year ago, AMRK represents a safe, countercyclical, and undervalued stock at this level. Management has been transparent in the past about their desire to sell the business after demonstrating its earnings power during volatile times, and with so many shares held by insiders the incentive remains for a sale. Given recent performance and macro events, I expect AMRK will obliterate the $1.30 earnings estimate for Q2-21, and with current silver market volatility, push even higher in Q3. I expect shares to re-rate above $40 during 2021.

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