Silver Wheaton (SLW, Financial) posted not so impressive results in the recently reported quarter. The main reason behind this soft performance in the prevailing challenges in the commodity pricing. However, the overall performance of Silver Wheaton is commendable. The company is generating solid operating margins while also maintaining a solid production level in the silver industry. The company is confident of performing better in future due to many key reasons that it is having under its camp. It is majorly counting on its key growth platforms namely Salobo and Constancia which saw excellent progress delivering record production levels. Let's have a look at its long term prospects.
Expecting better times ahead
Despite the headwinds, Silver Wheaton is confident about a better performance in future. It is largely counting on its impressive portfolio. It is expecting a lot from two of its smaller assets Mineral Park and Campo Morado, which are least affected by the lower commodity prices. In addition, Silver Wheaton is also focusing on various other initiatives to improve its profitability. It is planning to make significant investments in some of the growth initiatives also minimizing the costs to improve its margins. This seems to be a wise move by the company as in future if the commodity prices regains its lost ground, this initiative can benefit it well, strengthening its position in the market.
Moving ahead, Silver Wheaton is also engaged in developing a streaming business model which it thinks to be an efficient business practise which will help it to improve its financial performance. With this, the company will be free to focus on not just one mine also, it need not invest in the exploration costs. The key benefit from this business model is that this streaming model is based on the premise of paying low predictable costs for precious metal streams from a diverse portfolio of high quality mines.
This strategy has been benefiting the company for more than 10 years and if the precious metal prices returns to its glory in future this strategy will positively affect its earnings in future. Moving on, Silver Wheaton has maintained a solid financial flexibility which is reflecting the strength of its balance sheet. The company has a solid financial cash flexibility of $94 million which can further attract the investors leading it to gain much market share in the upcoming quarters.
As the current equity market is also weak the company is not seeing much of early deposit structure agreements. But to be still profitable in it, Silver Wheaton is continually focusing on investing in well-managed high quality assets. The company is looking for the correct time to respond to the growing opportunities.
Conclusion
Moving on to the fundamentals, the stock looks reasonable with a trailing P/E of 29.70 while the forward P/E of 25.51 shows good growth in earnings in the near term. A solid profit margin of 37.34% can be a solid attraction to the investors, helping the company to gain market share in future. All these aspects indicates that Silver Wheaton’s efforts are paying off for it and long term prospects of the company also looks strong. As of now, Silver Wheaton is a good pick.
