A-Mark Precious Metals: A Good Name For Gold Bugs

Core Viewpoint - A-Mark Precious Metals, Inc. has experienced a 20% decline in share price since its 52-week high in June 2023, primarily due to soft silver supply-demand dynamics, but a recent acquisition in Asia may lead to an earnings turnaround [3] Company Overview - A-Mark Precious Metals, Inc. is a fully integrated downstream precious metals platform offering a range of products including gold, silver, platinum, palladium, and copper bullion, as well as numismatic coins [4] - The company was founded in 1965 and went public in 2014, with shares currently trading around $32.50, giving it a market cap of approximately $750 million [4] Recent Developments - A-Mark's recent acquisition of Hong Kong-based LPM Group Limited for $41.5 million, with potential earnouts of $37.5 million, marks its entry into the Asian market [5] - The company has repurchased 611,360 shares in the first half of FY24, representing nearly 3% of total outstanding shares [12] Financial Performance - For FY23, A-Mark reported income before taxes of $90.5 million on revenue of $7.29 billion, reflecting a 13% increase in income and a 21% increase in revenue compared to FY22 [8] - The Direct-to-Consumer segment generated FY23 income before taxes of $110.9 million on revenue of $2.00 billion, despite a 14% decrease in silver sales volume [9] - In 2Q FY24, the company reported earnings of $0.72 per share and Adj. EBITDA of $25.1 million on revenue of $2.08 billion, representing significant decreases from the previous year [11] Market Context - The precious metals market has been influenced by inflation, global supply chain issues, and geopolitical tensions, benefiting A-Mark in the past [10] - The stock reached an all-time high of $44.60 in April 2022 but has since declined due to disappointing operational performance [10] Analyst Sentiment - A-Mark's balance sheet remains solid with cash of $28.5 million against debt of $298 million, resulting in a net leverage of 1.6 [12] - Analysts maintain a positive outlook with one outperform and three buy ratings, expecting earnings of $3.03 per share on revenue of $8.96 billion in FY24 [12] - Board member Jess Ravich's recent purchase of 20,000 shares at an average price of $25.63 indicates confidence in the company's future [13] Future Outlook - The acquisition in Asia is expected to enhance A-Mark's capabilities and product offerings, potentially leading to improved financial performance [14] - The current share price presents an attractive entry point, trading at just over 10 times FY24E EPS and 6.5 times FY25E EPS [14]