Nexa Resources (NEXA) Draws Fresh Deal Attention, Is The Upside Already Priced In?

Why Nexa Resources Stock Is Back in Focus

Investor attention has turned to Nexa Resources (NEXA) after Boliden confirmed discussions with Nexa Resources and controlling shareholder Votorantim about a possible purchase of Votorantim's stake, although there is no certainty any deal will occur.

See our latest analysis for Nexa Resources.

Despite the takeover speculation, Nexa Resources has seen recent share price pressure, with the stock down 10.53% over the last day and 21.44% over 90 days. However, the year-to-date share price return of 43% sits alongside a very strong 1-year total shareholder return of 160.25%.

If this kind of move has you looking beyond a single miner, it could be a good moment to scan other producers through the 8 top copper producer stocks.

After such sharp swings in Nexa Resources, it is fair to ask how much reflects changing views on a potential deal and how much ties back to the core zinc mining and smelting business, which is where valuation comes in next.

Most Popular Narrative: 16.2% Undervalued

The latest narrative pegs Nexa Resources' fair value at $15.00 per share, compared with a last close of $12.57. This frames the takeover talk against a valuation that already looks discounted.

The valuation also remains visibly compressed. Nexa’s shares are currently around $8.77. The equity market is still treating it more like a stressed cyclical than a company that just posted over $1.1 billion of adjusted EBITDA and brought net leverage down materially.

Read the complete narrative.

Want to see why this narrative still sees upside after a 160% 1 year total return? The fair value hinges on robust profitability, improving leverage, and a future earnings profile that assumes more than a one off cyclical spike.

Result: Fair Value of $15.00 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, Nexa Resources still faces clear risks, including exposure to weaker zinc prices and potential operational setbacks across its Latin American mines and smelters.

Find out about the key risks to this Nexa Resources narrative.

Another View on Nexa Resources Valuation

While the narrative fair value for Nexa Resources sits at $15.00 per share, the SWS DCF model points the other way, with a future cash flow value of $8.91. That implies the stock is trading above this estimate, so is the market already pricing in a richer long term story?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Nexa Resources for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 49 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Next Steps

With sentiment on Nexa Resources clearly mixed, with both risks and rewards in play, move quickly to review the details and decide where you stand using the 4 key rewards and 2 important warning signs.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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