Silver Wheaton: Unique Silver Miner Appears Cheap

| About: Silver Wheaton (SLW)

Mining stocks have been ugly across the board for quite some time. Iron ore prices have been declining and copper is also showing declines recently which is disturbing given the market continues to climb (Who is wrong? Bulls or Dr. Copper?). Worse hit of all have been the gold and silver miners who have had miserable performance for the most part over the last year and a half. One large unique silver miner, Silver Wheaton (NYSE:SLW), does not seem to be getting the right amount of positive attention from investors given some recent positive catalysts. Growth investors should consider it for accumulation as the shares look 50% undervalued according to analysts.

Recent positives for SLW:

  • It recently announced quarterly earnings of 50 cents a share, 9 cents above estimates. The miner raised silver production by 22% Y/Y and revenue is up 50% from same quarter in 2012.
  • Silver production was up 80% Q/Q as production increased significantly at several of its mines. The company plans to double production from FY2012 to FY2017.
  • In addition to the some 27mm ounces of silver produced in FY2012, the company also produced 50,000 ounces of gold in FY2012 which should increase substantially going forward given a recent $1.9B acquisition of some gold streams from Vale.
  • The company grew reserves over 35% in FY2012.

Silver Wheaton Corp is a mining company that operates as a silver streaming company worldwide. The company has 14 long-term silver purchase agreements and 2 long-term precious metal purchase agreements whereby it acquires silver and gold production from the counterparties.

Four additional reasons SLW has significant upside from $31 a share:

  1. The 11 analysts that cover the shares have a median price target of $48.50 a share on SLW. This is more than 50% above the current stock price.
  2. Analysts expect another impressive 30% hike in revenues in FY2013. The stock sells for a minuscule five year projected PEG (.22).
  3. The stock sells in the bottom third of its five year valuation range based on P/E, P/S and P/B.
  4. The company has grown revenues at better than a 35% CAGR over the last five years. Earnings have grown better than 100% CAGR over that time frame. This consistent growth stock can now be had for just 13.5x 2014's projected earnings.

Disclosure: I am long SLW. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.