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Why Is Wheaton Precious Metals Analysts’ Favorite Bet on Gold?

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Jan. 23 2019, Updated 1:10 p.m. ET

Analysts’ ratings for WPM

Among major gold (GLD) (IAU) mining and gold streaming companies (GOAU), Wheaton Precious Metals (WPM), the world’s largest precious metals streaming company, has received the highest percentage of “buy” recommendations at 90%. 

At the end of November, it had “buy” ratings from 100% of the analysts covering it.

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Distinct business model

Wheaton Precious Metals, previously known as Silver Wheaton (SLW), is a royalty and streaming company. Unlike their mining peers (GDX), royalty and streaming companies don’t own mines. They provide up-front funds to precious metals mining companies in exchange for the right to buy their product streams at lower prices in the future.

According to the consensus compiled by Thomson Reuters, 11 Wall Street analysts are currently covering Wheaton Precious Metals.

Future development potential

WPM stock fell 11.7% in 2018, and it’s fallen 2.1% year-to-date in 2019. Its performance has almost been on par with that of the VanEck Vectors Gold Miners ETF (GDX). Analysts are still optimistic about the future development projects it’s financing. Wheaton Precious Metals’ last two streaming deals should help it diversify further from silver.

In December 2018, the company settled its tax dispute with the Canada Revenue Agency, which removed a significant overhang from its stock. This development should help the stock, as the uncertainty regarding the use of its business model is settled.

Analysts expect Wheaton’s revenue to rise 8.2% in 2019 and 4.9% in 2020 after an expected fall of 6.1% in 2018. Its EBITDA is also expected to rise 11.7% and 5.9%, respectively, in 2019 and 2020, implying margins of 64.9% and 66.1%, respectively, compared to 62.9% in 2018.

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