Wheaton Precious Metals Corp Valuation – July 2018 $TSE-WPM

Company Profile (excerpt from Reuters): Wheaton Precious Metals Corp, formerly Silver Wheaton Corp, is a Canada-based pure precious metals streaming company engaged in the sale of silver and gold. The Company operates through eight segments: the silver produced by the San Dimas, Penasquito and Antamina mines, the gold produced by the Sudbury and Salobo mines, the silver and gold produced by the Constancia mine and the Other mines, and corporate operations. The Company has entered into long-term purchase agreements and early deposit long-term purchase agreement associated with silver and gold (precious metal purchase agreements), relating to mining assets, whereby Silver Wheaton acquires silver and gold production at various mines. The San Dimas gold-silver deposit is located in the San Dimas district on the border of Durango and Sinaloa states. The Company holds interest in Los Filos mine, Zinkgruvan mining operations, Stratoni mine, Keno Hill silver, Cozamin mine, Aljustrel mine, 777 mine and Constancia mines.


Downloadable PDF version of this valuation:

ModernGraham Valuation of TSE-WPM – July 2018

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 $9,660,783,000 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.51 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 -36.79% Fail
6. Moderate PEmg Ratio PEmg < 20 72.04 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.95 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 2.51 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 9.25 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 $0.39
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade F
MG Value based on 3% Growth $5.64
MG Value based on 0% Growth $3.31
Market Implied Growth Rate 31.77%
Current Price $28.03
% of Intrinsic Value N/A

Wheaton Precious Metals Corp 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 $1.08 in 2014 to an estimated $0.39 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 31.77% 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 Wheaton Precious Metals Corp revealed the company was trading above its Graham Number of $15.65. The company pays a dividend of $0.42 per share, for a yield of 1.5% Its PEmg (price over earnings per share – ModernGraham) was 72.04, which was above the industry average of 46.07. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-1.73.

Wheaton Precious Metals Corp scores quite poorly in the ModernGraham grading system, with an overall grade of F.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$1.73
Graham Number $15.65
PEmg 72.04
Current Ratio 2.51
PB Ratio 1.95
Current Dividend $0.42
Dividend Yield 1.50%
Number of Consecutive Years of Dividend Growth 2

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Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2018
Total Current Assets $154,240,000
Total Current Liabilities $61,522,000
Long-Term Debt $857,475,000
Total Assets $7,291,421,000
Intangible Assets $0
Total Liabilities $921,092,000
Shares Outstanding (Diluted Average) 443,181,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $0.77
Dec2017 $0.17
Dec2016 $0.60
Dec2015 -$0.56
Dec2014 $0.65
Dec2013 $1.12
Dec2012 $1.63
Dec2011 $1.59
Dec2010 $0.44
Dec2009 $0.40
Dec2008 $0.09
Dec2007 $0.37
Dec2006 $0.43
Dec2005 $0.17
Aug2004 -$0.10
Aug2003 $0.04
Aug2002 -$0.10
Aug2001 -$0.01
Aug2000 $0.01

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.39
Dec2017 $0.26
Dec2016 $0.44
Dec2015 $0.53
Dec2014 $1.08
Dec2013 $1.21
Dec2012 $1.12
Dec2011 $0.76
Dec2010 $0.35
Dec2009 $0.30
Dec2008 $0.23
Dec2007 $0.26
Dec2006 $0.17
Dec2005 $0.03
Aug2004 -$0.04
Aug2003 -$0.01
Aug2002 -$0.03

Recommended Reading:

Other ModernGraham posts about the company

Silver Wheaton Corp Valuation – December 2016 $SLW
Silver Wheaton Corp Valuation – August 2016 $SLW
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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