Will Wheaton Precious Metals Make New Highs in 2022?

April 28, 2022 at 10:37 AM EDT

Precious metals seller Wheaton Precious Metals (WPM) has achieved substantial growth over the past year, due mostly to a rebound in silver prices. But the stock has declined more than 6% in price over the past month. So, can it attain new highs in 2022? Read on to learn our view.

Wheaton Precious Metals Corp. (WPM) in Vancouver, Canada, is a precious metals seller in Canada and globally. The company’s offerings include gold, silver, palladium, and cobalt deposits. In 2021, WPM reported the sale of 663.4 thousand gold equivalent ounces at $1,811 per ounce. Given Russia’s move to peg its currency to gold, the company might benefit from the strength in gold futures. WPM has experienced substantial growth over the past year, due to a surge in silver prices.

WPM’s stock has gained 8.3% over the past year and 4.9% year-to-date to close yesterday’s trading session at $45.04. It has gained 15.5% in price over the past three months. However, the stock has declined 6.7% over the past month and 8.3% over the past five days.

Here is what could shape WPM’s performance in the near term.

Solid Bottomline

For its fiscal year ended Dec. 31, 2021, WPM’s sales increased 9.6% year-over-year to $1.20 billion. Its earnings from operations rose 45.2% from the prior year to $754.66 million. Its net earnings and EPS came in at $754.89 million and $1.67, registering improvements of 48.7% and 48.3%, respectively, from the prior-year period.

Mixed Analyst Sentiments

The consensus EPS estimate of $0.34 for the first fiscal quarter (ended March 2022) indicates a 4.5% year-over-year decrease. Likewise, the consensus revenue estimate for the same quarter of $313.27 million reflects a decline of 3.4% from the prior-year quarter.

However, analysts expect WPM’s EPS to increase 2.2% year-over-year to $0.37 for the second fiscal quarter (ending June 3o, 2022), while the Street expects revenue for the same quarter to increase 4.2% from the same period in the prior year to $344.41 million.

Premium Valuation

In terms of its forward non-GAAP P/E, WPM is currently trading at 31.13x, which is 159.5% higher than the 12.00x industry average. The stock’s 6.23 forward non-GAAP PEG multiple is 424% higher than the1.19 industry average.

Mixed Profitability

WPM’s 62.80%, 71.06%, and 62.82% respective trailing 12-month EBIT, EBITDA, and net income margin are 350.26%, 226.24%, and 641.54% higher than their industry averages of 13.95%, 21.78%, and 8.47%.

However, its 4.05% and 12.62% respective trailing 12-month levered FCF margin and ROE are 31.23% and 2.25% lower than the 5.89% and 12.91% industry averages.

POWR Ratings

WPM has an overall C rating, which equates to Neutral in our proprietary POWR Rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

WPM has a Sentiment grade of C, which is in sync with the mixed analyst sentiments regarding the stock.

The stock also has a Momentum grade of C, which is justified since it is trading above its 200-day Moving Average of $43.25, but below its 50-day Moving Average of $47.31.

In the 10-stock Miners – Silver industry, WPM is ranked #2. Click here to see the additional POWR Ratings for WPM (Growth, Value, Stability, and Quality).

View all the top-rated stocks in the Miners – Silver industry here.

Click here to check out our Gold and Silver Industry Report for 2022

Bottom Line

WPM possesses a solid bottom line and might stand to benefit from the strengthening of gold futures. However, given its stretched valuation and lean ROE, we think it might be better to wait for a better entry point in the stock.

WPM shares were trading at $45.63 per share on Thursday afternoon, up $0.59 (+1.31%). Year-to-date, WPM has gained 6.62%, versus a -9.75% rise in the benchmark S&P 500 index during the same period.

About the Author: Anushka Dutta

Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research.

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