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Fortuna Silver (FVI.to) $FSM 2q14 results

There’s slightly more in this one than yesterday’s succinct and wholly accurate post on EDR.to’s 2q14 (which was far more realistic than the “in line with expectations” stupidity from just about every house anal ysis out there; explained today’s drop to your client base yet, lapdogs?). But today’s isn’t that one, today’s post is about Fortuna Silver (FVI.to) (FSM), on the back of tonight’s filing of 2q14 results. 
Assets at $330.791m for 2q14 show like this compared to previous quarters. Cash is down but Equivalents are up due to what looks like FVI tucking cash into an interest paying account or something (time deposit, probably). No problems here.

Liabilities have moved up a bit, but not a biggie, because…

…what really matters here is working capital and that’s a decently liquid position. However, we can see that FVI has had trouble in adding to its current assets via this chart and we’re still creeping up rather slowly.

That’s because of this, the way revenues and costs leave little in the way of mine operating profits for a company with a near $800m market cap these days. FVI at $6.27 a share is trading at a 12X foward multiple to mine operating earnings (not EBIT, not post-tax earnings) and that does look expensive.

This is confirmed by the net earnings chart. FVI seems to have been given a pass for quite a long time on these lacklustre bottom line numbers because of its growth profile and all that. Well folks, here we are with the back end of the throughput upgrades at both Caylloma and San José done and these net figures are still languishing. You net $2.87m and you’re worth $790m? Something isn’t right here.

And this chart, which shows equity (or Book Value “BV” if you prefer, defined as all assets minus all liabilities) per share and then the ratio between BV and its share price at end each quarter (plus tonight in the “now” column) rams this message home. FVI is a good operator, but its share price looks for all the world like it’s got ahead of itself. 
So yeah, I think FVI is a near-term short trade on the back of a somewhat disappointing quarter. Put me down for it revisiting $5.50 soon, assuming silver stays roughly where it is. Also put me down for all the house anal ysts giving it the “hey, not so bad” bullcrap and then the stock going South tomorrow anyway.

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