Can North American Palladium Recover by Year End?

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With half of 2012 in the record books, it's important to take a look at whether the stocks that interest you can live up to their full potential. By making sure you know about a company's future plans and possible challenges, you can make a better decision about whether it's a smart investment for your portfolio.

Today, let's take a look at North American Palladium (NYS: PAL) . As we saw in our look at North American Palladium last month, the niche miner is one of the only sources of palladium in the world, yet falling demand for the metal has led to its price falling recently, pressuring the miner's stock price. With the specter of global recession on the horizon, some fear a worsening environment ahead. Let's take a quick look at North American Palladium's prospects for the rest of the year and beyond.

Stats on North American Palladium

Average Stock Price Target$3.96
2012 EPS Estimate$0.01
2013 EPS Estimate$0.21
2012 Sales Growth Estimate14.7%
2013 Sales Growth Estimate27.8%
CAPS Rating (out of 5)****

Source: Yahoo! Finance.

What will the rest of 2012 bring for North American Palladium?
Platinum-group metals prices dictate profit levels for North American Palladium and rival Stillwater Mining (NYS: SWC) , and recent price trends haven't been favorable. Early this year, a Reuters poll pegged palladium prices at $725 per ounce this year, a slight drop from the $748 median trading price last year. The survey blamed a loss in investor interest in palladium ETFs like ETFS Physical Palladium (NYS: PALL) , citing figures that they lost a third of their holdings in 2011, boosting the supply of palladium bullion on the open market. Next year, though, those surveyed expected a rise to $819 per ounce.

But some see a stronger rebound coming. In its second-quarter commodity update, Citi projected that palladium prices would top $800 for 2012 and weigh in at an average of $925 in 2013. That would go a long way toward North American Palladium meeting analysts' earnings projections next year.

The key to that rebound will come from the auto industry. Ford (NYS: F) and General Motors (NYS: GM) have definitely had some successes this year, but Europe in particular continues to be a big drag on their results. Moreover, with Ford focusing more on boosting margins than on raising sales volumes, its demand for platinum-group metals could actually fall even if the carmaker earns better profits.

For its part, North American Palladium is optimistic about its future. About a month ago, CFO Jeff Swinoga spoke at the Euro Pacific Capital investor conference, noting that declining production in Russia and labor problems in South Africa could spur a general rise in palladium prices, especially as demand continues to grow. If that comes to pass, then the stock could easily recover by year end.

North American Palladium has some interesting prospects, but I'd suggest you look at another company that could do even better. Read The Motley Fool's latest special report on gold to discover the tiny gold stock digging up massive profits. It's free but only available for a limited time.

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At the time this article was published Fool contributor Dan Caplinger doesn't own shares of the companies mentioned. The Motley Fool owns shares of Ford. Motley Fool newsletter services have recommended buying shares of Ford and General Motors, as well as creating a synthetic long position in Ford. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool has a disclosure policy.

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