Endeavour Silver: 'Massive organic growth'

If you're looking for a way to play the rise in silver without having to take on the risk of futures positions, Endeavour Silver (EXK) should be at the top of your list of potential investments.

Endeavor recently released its annual results for 2010; to say that they hit the ball out of the park would be an understatement.

Founded in 1981, Endeavour Silver is based out of Vancouver, Canada.

The company has more than 750 full-time employees, with production of gold and silver in Mexico. It has a market cap of about $700 million, with an enterprise value of $574 million, once net debt and cash is accounted for.

The company reported record earnings, cash flow, and revenue in 2010. While these are all great data points, and ones we would expect to see in a bullish commodity market, the little details are what really piqued my interest.

For its 2010 fiscal year, Endeavour Silver Corp reported:

* Operating cash flow jumped 167%.
* Revenue increased by 70%.
* Realized silver prices rose 27% to $19.62 per ounce sold.
* Silver production increased 26%.
* A silver production forecast of 3.7 million ounces in 2011.
* And a revenue forecast of $113.9 million.

I love a company that is executing ahead of its peer pack - but that's not all. When I was a portfolio manager, I was continuously on the lookout for a company exhibiting what I call "M.O.G" or Massive Organic Growth.

M.O.G is that magic sweet spot in a company lifecycle, where you believe the investment is growing its assets quicker internally than what you believe the market is valuing it at. And that's what we're talking about with Endeavor.

Endeavor is forecasting its seventh year of organic growth, with a major expansion of its milling capacity. This is exactly the type of action necessary to keep driving additional production increases, while possibly lowering cost per ounce.

If silver prices continue to average over $30 per ounce, the company is looking at a profit margin of over $24 per ounce. I love it when I can buy shrinking costs, growing production, and zero debt.

Endeavour Silver has more than $100 million in working capital, no debt, with a falling cost to produce the next ounce at margin. This is where you get massive organic growth, and this is where we want to be investing our money in silver.

Endeavour Silver is one of those rare investments where everything is lined up for a continued blue-sky break out over the longer term.

The company's stock has traded between a low of $3.07 on July 7, 2010, to a 52-week high of $10.33 on March 7. The stock currently is trading in the mid $9 range, and should be considered a "Buy" at these prices based on their M.O.G. profile.