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Why Many Analysts Like Wheaton Precious Metals

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Jun. 28 2019, Updated 2:36 p.m. ET

Analysts’ ratings for WPM

Among major gold (GLD) mining and gold streaming companies (GOAU), Wheaton Precious Metals (WPM), the world’s largest precious metals streaming company, is right behind Agnico Eagle Mines (AEM) in terms of analyst “buy” ratings.

At the end of November, it had “buy” ratings from 100% of the analysts covering it. Currently, 81% of the 11 analysts covering it rate it a “buy.”

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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.

Due to a stable revenue profile, these royalty companies have lower leverage to gold prices as compared to their mining peers. This is the reason that WPM’s stock has risen 20% in the last one month as compared to the VanEck Vectors Gold Miners ETF’s (GDX) gain of 26%.

Future development potential

Analysts are 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 by 8.1% in 2019 and 8.9% in 2020 after a fall of 5.8% in 2018. Its EBITDA is also expected to rise 11.9% and 12.3%, respectively, in 2019 and 2020, implying margins of 65.4% and 67.4%, respectively, compared to 63.2% in 2018.

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