NEW YORK (TheStreet) -- Shares of First Majestic Silver (AG) - Get Report were dropping on heavy trading volume mid-Thursday afternoon following a bearish note from Kerrisdale Capital saying that while the stock's valuation is "up in the clouds," the Vancouver-based mining company offers "no silver lining."
"As precious-metal prices have rebounded, First Majestic has gotten a new lease on life, rising 268% year-to-date - an increase eight times larger than that of silver," the firm said.
The "speculative frenzy" on the stock may have "gone too far," Kerrisdale added.
Valuation for First Majestic is "outrageously detached from reality," and the firm noted that the stock is not only expensive in comparison to peers but also related to First Majestic's own history.
"First Majestic has benefited from less sober investors seeking the cleanest 'play' on a silver bull market and buying at any price," Kerrisadale said.
Additionally, silver prices were advancing this afternoon following downbeat data from the Institute for Supply Management indicating that the U.S. manufacturing index in August fell to 49.4% from 52.6% last month.
The drop could push the Federal Reserve to pull back from an interest rate hike, MarketWatch reports.
For December delivery, silver was up 1.17% to $18.93 per ounce on the COMEX this afternoon.
More than 14.05 million of First Majestic's shares have traded so far today vs. the 30-day average of 6.03 million shares per day.
Separately, TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author.
TheStreet Ratings rated this stock as a "hold" with a ratings score of C-.
The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity and weak operating cash flow.
You can view the full analysis from the report here: AG