Silver Wheaton Corp Valuation – December 2016 $SLW

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Stocks for Using A Benjamin Graham Value Investing Strategy – August 2016.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Silver Wheaton Corp (SLW) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Silver Wheaton Corp. (Silver Wheaton) is a mining company. The Company is a pure precious metals streaming company engaged in the sale of silver and gold. It has entered into over 19 long-term purchase agreements and approximately two early deposit long-term purchase agreement associated with silver and gold, relating to over 30 different mining assets, whereby Silver Wheaton acquires silver and gold production at various mines. Its portfolio of precious metal streams includes over 22 operating mines and seven development projects. It has nine segments, which include the silver produced by the San Dimas, Yauliyacu, Penasquito, Barrick and Antamina mines; the gold produced by the Sudbury and Salobo mines, and the silver and gold produced by the Other mines and corporate operations. Its other mines include Los Filos mine, Zinkgruvan mining operations, Stratoni mine, Keno Hill silver, Cozamin mine, Neves-Corvo mine, Aljustrel mine, 777 mine and Constancia mines.

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Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Recent valuations of the components of the Dow Jones Industrial Average are available for free members, including this one of Microsoft Corporation.  In addition, here is a post detailing what can be found within each individual company’s valuation.


Downloadable PDF version of this valuation:


Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $8,511,302,329 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 8.23 Pass
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -9.76% Fail
6. Moderate PEmg Ratio PEmg < 20 41.59 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.66 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 8.23 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 11.71 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

Stage 2: Determination of Intrinsic Value


EPSmg $0.45
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $6.52
MG Value based on 0% Growth $3.82
Market Implied Growth Rate 16.55%
Current Price $18.69
% of Intrinsic Value N/A

Silver Wheaton Corp. (USA) does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability or growth over the last ten years, and the poor dividend history, and the high PEmg ratio. The Enterprising Investor has concerns regarding the level of debt relative to the net current assets, and the lack of earnings stability or growth over the last five years. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $1.11 in 2012 to an estimated $0.45 for 2016. This level of demonstrated earnings growth does not support the market’s implied estimate of 16.55% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Silver Wheaton Corp. (USA) revealed the company was trading above its Graham Number of $12.22. The company pays a dividend of $0.2 per share, for a yield of 1.1% Its PEmg (price over earnings per share – ModernGraham) was 41.59, which was below the industry average of 62.88, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-2.79.

Silver Wheaton Corp. (USA) scores quite poorly in the ModernGraham grading system, with an overall grade of D.

Stage 3: Information for Further Research


Net Current Asset Value (NCAV) -$2.79
Graham Number $12.22
PEmg 41.59
Current Ratio 8.23
PB Ratio 1.66
Current Dividend $0.20
Dividend Yield 1.07%
Number of Consecutive Years of Dividend Growth 0


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Most Recent Balance Sheet Figures

Balance Sheet Information 9/16/2016
Total Current Assets $130,779,000
Total Current Liabilities $15,881,000
Long-Term Debt $1,345,000,000
Total Assets $6,326,032,000
Intangible Assets $0
Total Liabilities $1,362,857,000
Shares Outstanding (Diluted Average) 441,917,000

Earnings Per Share History

Next Fiscal Year Estimate $0.59
Aug2015 -$0.41
Aug2014 $0.56
Aug2013 $1.05
Aug2012 $1.65
Aug2011 $1.55
Aug2010 $0.44
Aug2009 $0.38
Aug2008 $0.07
Aug2007 $0.37
Aug2006 $0.37
Aug2005 $0.15
Aug2004 -$0.08
Aug2003 $0.03
Aug2002 -$0.06

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $0.45
Aug2015 $0.55
Aug2014 $1.03
Aug2013 $1.18
Aug2012 $1.11
Aug2011 $0.74
Aug2010 $0.34
Aug2009 $0.28
Aug2008 $0.21
Aug2007 $0.24
Aug2006 $0.15
Aug2005 $0.03
Aug2004 -$0.03
Aug2003 -$0.01
Aug2002 -$0.02

Recommended Reading:

Other ModernGraham posts about the company

Silver Wheaton Corporation – February 2016 Update $SLW
Silver Wheaton Corporation Valuation – October 2015 Update $SLW
Silver Wheaton Corporation Valuation – Initial Coverage $SLW

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The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

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