Operational update at Cajamarquilla puts focus on Nexa Resources stock

Nexa Resources (NEXA) informed the market that production at its Cajamarquilla zinc smelter in Peru is gradually resuming after a mid May incident, giving investors clearer insight into the scale of the disruption.

The Cajamarquilla update landed after a choppy spell for the stock, with the 7 day share price return down 14.22% and the 30 day share price return down 6.58%, even as the 90 day share price return is up 17.90% and the year to date share price return is up 46.87%. Over a longer horizon, total shareholder return sits at 160.81% over one year and 153.47% over three years, which highlights strong past rewards despite recent short term volatility.

If this kind of operational headline has you thinking about where else to look in metals, it could be a useful moment to check out 8 top copper producer stocks

With Nexa trading around US$12.91 after a sharp pullback and recent total returns still very large over one and three years, you have to ask: is the stock now undervalued, or is the market already pricing in future growth?

Most Popular Narrative: 13.9% Undervalued

HedgeY’s narrative pegs Nexa’s fair value at $15.00 per share, compared with the latest close at $12.91, and frames that gap around cash flow strength and zinc exposure.

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.

Want to see what underpins that valuation gap? The narrative leans hard on recent profitability, balance sheet repair, and an earnings power profile tied to zinc and by product cash flow torque.

Result: Fair Value of $15.00 (UNDERVALUED)

However, you still have to weigh Nexa’s heavy zinc exposure and the operational complexity of running multiple mines and smelters, which can quickly challenge any undervalued thesis.

Another view: cash flow model paints a different picture

HedgeY’s $15.00 per share fair value points to Nexa looking undervalued, but the SWS DCF model tells a more cautious story. On that view, Nexa’s current $12.91 share price sits above an estimated future cash flow value of $10.18, which implies the stock screens as overvalued instead.

For investors, that clash between an earnings based narrative and a cash flow based model raises a useful question: which set of assumptions about future zinc cycles, volumes, and margins feels more realistic to you, and how much room for error are you comfortable taking on with a cyclical miner?

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 46 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 clearly mixed, this is the moment to check the numbers for yourself, weigh both sides, and then act with confidence by reviewing the 3 key rewards and 3 important warning signs

Looking for more investment ideas?

If Nexa has sharpened your focus, do not stop here. Broaden your watchlist now so you are not relying on one stock alone.

• Target potential mispricings by scanning 46 high quality undervalued stocks that combine quality fundamentals with room for a better entry point.
• Build a steadier income stream by reviewing 8 dividend fortresses that offer higher yields with supporting fundamentals.
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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.