Can Stillwater Bounce Back in the Second Half?

With more than 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 Stillwater Mining (NYSE: SWC  ) . As we saw in our look at Stillwater Mining earlier this month, weakness in platinum and palladium prices as well as concern about the company's shift toward gold and copper combined to hit the shares hard. With economic concerns continuing to weigh on the global economy, it looks like the mining company could face problems for quite a while. Can the company escape from its lows? Let's take a quick look at Stillwater Mining's prospects for the rest of the year and beyond.

Stats on Stillwater Mining

Average Stock Price Target $13.80
2012 EPS Estimate $0.46
2013 EPS Estimate $0.84
2012 Sales Growth Estimate (7.3%)
2013 Sales Growth Estimate 17%
CAPS Rating (out of 5) ***

Source: Yahoo! Finance.

Can Stillwater recover by year end?
As we saw with North American Palladium (NYSE: PAL  ) recently, Stillwater's big issue is the recent drop in platinum and palladium prices. In stark contrast to calls for $700-$800 prices for palladium, the current price below $600 could cause problems for Stillwater's bottom line. Moreover, with platinum below $1,400 an ounce -- well below the price of gold -- the platinum-group metals in general have fallen out of favor.

Traditionally, the big source of demand for platinum-group metals has come from Ford (NYSE: F  ) , General Motors (NYSE: GM  ) , and the rest of the auto industry. Problems in Europe, however, have plagued U.S. automakers, and a weak recovery here has muted demand for the metals in catalytic converters. Unless a full-scale boom in autos takes hold, Stillwater shouldn't expect a big ramp-up in business from the industry.

One interesting trend that's taking place, though, is that discerning jewelry customers are shifting to the white metals. China has become a substantial consumer of platinum jewelry, while India has also made a shift from gold to platinum based on both price and rarity. If that jewelry demand continues to grow, it could put an important floor under metals prices, and that could finally allow Stillwater to hit bottom.

Put simply, Stillwater needs more favorable pricing for its metals in order to bounce back from its recent losses. With many investors increasingly moving away from precious metals, it's far from certain that Stillwater will be able to regain its losses by the end of the year.

Stillwater Mining may have a questionable future, but there are other promising mining plays out there. 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.

Also, consider that Ford might be a better play than Stillwater. Find out why from one of our top equity analysts in our premium research report on Ford. Get instant access to this report today.

Click here to add Stillwater Mining to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.

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 on 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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