Silver Wheaton (SLW) is currently one of the most appealing assets in the mining industry. Shareholders should hold on to this unique investment, and interested investors should buy it now and hold it for the long term. Silver Wheaton has a unique business model that insulates it from many of the expenses and dips that other competitors in the mining industry are susceptible to. This is a far more advantageous asset than investing in metals or mining operations. The fluctuation of the dollar and domestic and global economies all affect the value of silver. Owning shares of Silver Wheaton is more profitable than silver bullion because shareholders are protected from the potential losses of investing directly in silver or mining entities.
Silver Wheaton's growth increased by more than 26% from the previous year and by more than 4% from the previous quarter. Its PEG ratio is around 0.5, while its beta is closer to 1.5. The current price is over 14 times earnings, which is an improvement from the trailing 12 months price of over 16 times earnings. Silver Wheaton's margins have been relatively stable for the last three quarters. Return on equity has improved marginally by less than 1% over the past three quarters. The operating margin and net margin have decreased by less than around 2% and 0.5% over the past three quarters, respectively. Its current ratio has increased over the past three quarters and is currently over five. The debt-to-equity ratio has been stable at 0.02 for the past three quarters. Silver Wheaton's current dividend yield is around 1.37%, which equates to an annual dividend around $0.36.
Silver Wheaton's growth rate for this year is nearly triple the industry average. Its growth rate for the past five years exceeds the industry average. The projected growth rate for next five years is more than double the industry average. At a price 16 times earnings, Silver Wheaton is valued at a high premium in comparison to the industry average. Both the price-to-cash flow ratio and dividend yield also exceed the industry average. The trailing 12 month net profit margin is almost triple the industry average, while the trailing 12 month return on equity is currently more than double the industry average. Silver Wheaton's balance sheet displays strong margins and substantial liquidity along with adequate long-term growth rates. By its financials alone, Silver Wheaton is one of the most appealing assets in the mining industry.
The current economic situation has a profound effect on the future price of silver. Whether or not the Fed enacts QE3 will greatly affect the price of silver. Competitors like Silvercorp (SVM) and Coeur d'Alene Mines (CDE) are more so affected by the changing price of silver than Silver Wheaton. Silvercorp is expected to double production by 2015. Silver Wheaton finances mining entities and collects on the discovered silver at a discount. Silver Wheaton is more expensive for investors than the competition, but it also has a greater opportunity to turn a profit. It's in a unique position where it benefits from the other companies in the industry like Barrick Gold (ABX) and Goldcorp (GG) rather than being rivaled against them. This is an opportune time to invest in the silver industry. If the Fed does enact QE3, the price of silver will certainly rally and Silver Wheaton's stock price will increase significantly as well.
Silver and other metals are also under pressure from the struggles in the European economy. As the dollar increases, the value of silver and other metals are suppressed. Silver is one of the most appealing metals because it is used in many popular electronics, while being available at a significant discount to gold. Silver Wheaton's advantage in the industry is the ability to avoid operational expenses and risks. Silver Wheaton operates by assessing the most advantageous investments and returns from various mining ventures. Silver can be produced as a byproduct from mining metals like lead, copper, or gold, so Silver Wheaton has more options to profit with calculated investments in the industry. Banks in Europe are lending less; this has made Silver Wheaton a more attractive financing option for many miners.
Silver Wheaton is able to invest in a variety of mining companies in exchange for purchasing the byproduct silver discoveries for around $4 per ounce. This is a profitable model regardless of silver's trading value on the market. This is Silver Wheaton's distinct advantage over individual investors and mining companies that focus on silver. This silver streaming technique consistently makes Silver Wheaton an undervalued asset when compared to the precious metal and mining companies on the market. Silver Wheaton makes short-term contracts as well as contracts for the life-term of particular mining expeditions. Silver Wheaton has significant leverage over the price of silver on the market. It keeps reserves in order to insure its investments each year and is consistently increasing its stake or production in silver each year. Its silver assets and profit margin will nearly double by the year 2016. Even if the price of silver drops drastically, Silver Wheaton is able to produce substantial profits because of its abundant reserves and purchasing model. Even at a premium price, Silver Wheaton has a great opportunity for returning profits to the shareholder.
The ability to own abundant reserves in silver bullion without owning any mines is the distinguishing factor that insulates Silver Wheaton from the revenue loss many miners and investors endure. The changes in economics and fiscal policy favor financing entities like Silver Wheaton over manufactures or mining companies. Since 2008, Silver Wheaton has significantly outperformed silver, with returns of 667% compared to 192%, respectively.
In 2011, Silver Wheaton had over $550 million in operating income with a profit margin of 76% while costing less than $30 million to operate. It has 16 purchase agreements with 13 gold mining companies around the world. It has around 800 million ounces in silver reserves and over 200,000 ounces in gold. Silver Wheaton capitalizes on this by holding its silver until it feels the market is at a favorable price for optimal earnings. Silver Wheaton is significantly leveraged over price and is steadily growing its reserves each year. In the precious metals market, this is the most valuable asset for shareholders to hold and interested investors to buy into.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
