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Analysts’ Favorites: A Look at the Top 10 Gold Miners

PART:
1 2 3 4 5 6 7 8 9 10 11
Part 2
Analysts’ Favorites: A Look at the Top 10 Gold Miners PART 2 OF 11

Wheaton Precious Metals: Number 1 in the Top 10 Precious Metal Stocks

Analyst ratings for WPM

We’ll start analyzing the top ten companies receiving “buy” ratings in the precious metal miners (GDX) universe by discussing Wheaton Precious Metals (WPM). As we mentioned in the previous part of this series, it has the highest percentage of “buy” ratings at 90.0%. 

Wheaton Precious Metals, previously known as Silver Wheaton (SLW), is a royalty and streaming company. Under this business model, companies do not own mines. Rather, they provide upfront cash to miners for the right to buy precious metals in the future at lower prices.

Wheaton Precious Metals: Number 1 in the Top 10 Precious Metal Stocks

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Twelve Wall Street analysts cover Wheaton Precious Metals, according to the consensus compiled by Thomson Reuters. As the analyst rating chart above shows, 11 (or 90.0%) of the analysts rate Wheaton Precious Metals as a “buy.” 

Wheaton Precious Metals’ close peers Franco-Nevada (FNV) and Royal Gold (RGLD) have “buy” ratings from 29% and 55% of the analysts, respectively.

Wheaton Precious Metals’ implied gain

Until the end of September 2017, Wheaton Precious Metals stock fell 1.2%. Year-to-date, it has underperformed its peers such as Sandstorm Gold (SAND), primarily on concerns of future production growth. Its balance sheet is not very strong with respect to making future accretive acquisitions. 

Analysts are optimistic about the future development projects the company has financed. Wheaton Precious Metals estimates that production from these projects could lead to production growth of more than 45% between 2017 and 2021.

While Wheaton Precious Metals’ average price target implies a potential upside of 40.0%, its target price has fallen ~10.0% in 2017. This decline is mostly due to the weakness in its stock price in 2017.

Valuations

Wheaton Precious Metals trades at a forward EV-to-EBITDA1multiple of 16.6x, which is a discount of 19% to the sector average multiple. The discount mainly reflects the lower production growth profile of this company versus its close peers. 

Some of its streams, including Barrick Gold’s (ABX) Pascua Lama, are facing issues. For more coverage on royalty companies’ relative valuation, please read Analyzing Relative Valuations for Royalty and Streaming Companies.

In the next part, we’ll look at analyst ratings for Agnico Eagle Mines (AEM).

  1. enterprise value to earnings before interest, tax, depreciation, and amortization
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