Nexa Resources (NYSE:NEXA) is back in focus after shareholders approved several amendments to its Articles of Association. This governance update arrives alongside recent production progress and strong Q1 adjusted EBITDA figures.

At a share price of $12.87, Nexa Resources has seen strong momentum build over the past year, with a year to date share price return of 46.42% and a 1 year total shareholder return of 161.59%. This reflects shifting expectations after higher Q1 adjusted EBITDA, production progress and the ongoing restart at the Cajamarquilla smelter.

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The stock now sits close to the average analyst target, yet trades at a large discount to some intrinsic value estimates. For Nexa Resources, after such a sharp rerating, where does a reasonable fair value range really lie?

Most Popular Narrative: 14.2% Undervalued

Compared with Nexa Resources' last close at $12.87, the most followed narrative sets fair value at $15.00, implying meaningful upside from current levels.

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.

According to HedgeY, this fair value hinges on Nexa Resources pairing strong recent profitability with an earnings profile that still prices in a cautious future. The narrative leans on the spread between current earnings power, projected revenue trends and the profit multiple usually reserved for stronger rated miners. Curious which earnings and margin assumptions sit underneath that $15.00 figure.

Result: Fair Value of $15.00 (UNDERVALUED)

However, Nexa Resources still carries clear risks, including exposure to volatile zinc prices and complex mine and smelter operations that could disrupt cash generation.

Another View: Nexa Resources Through The DCF Lens

There is a clear clash between the popular $15.00 fair value narrative for Nexa Resources and the SWS DCF model, which points to a future cash flow value of $8.75 per share, with the stock currently at $12.87. If cash generation tracks the DCF path instead of the narrative, is today’s price reflecting too much optimism?

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 44 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

If this mix of optimism and caution around Nexa Resources feels familiar, take a closer look at the underlying data now and weigh it against your own expectations by reviewing the 4 key rewards and 2 important warning signs.

Looking for more investment ideas beyond Nexa Resources?

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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.