Silver Wheaton (SLW, Financial) is the world’s largest company dealing primarily in gold and silver. It is not a mining company parse; instead, it offers upfront payments to mining companies in an agreement to have the first purchase of their products, in this case, gold or silver. The company has the opportunity of buying these precious metals at low prices and then selling them at great margins.
Silver Wheaton currently has agreements with 22 operating mines and 8 developmental projects around the globe. The company’s stock has just taken a breather after a recent upsurge and analysts and investors alike are wondering if it is time to go all in or out on this stock.
In order to answer that question, we will need to look at some numbers:
Recent Financials
Silver Wheaton released its Q2 results recently, and some of the notable points were the significant increases in attributed productions for both silver and gold. The attributed production for silver and gold increased by 11% and 26%, respectively, compared to results from the same quarter in 2015. With net earnings of $60 million, this represented a 12% gain over the same period last year. This, of course, spells great news to investors because these margins would only reflect positively on the stock price.
The company’s stock price had been rallying on, but has recently taken a break. Analysts are both perplexed and intrigued, deciding which route the stock price will take. Currently at $26.60, this could be the right time to add this stock to your portfolio. Deutsche Bank (DB, Financial) recently initiated coverage on the stock with a Buy rating and also tipped it to hit the $37 mark in the coming fiscal.
For a keen investor, you would realize that over the last couple of years, the stock has been bouncing off at $20 and upwards of $30, the more reason why the stock might gather momentum and get on another rally.
Silver prices have been on the up in 2016 and according to reports from various silver and golds focused platforms, such as this American Silver Eagles coins dealer, silver coins continue to trade at extremely tight margins compared to spot prices of the precious metal.
In addition, indicators point to the likelihood that this trend could continue in the foreseeable future. Gold prices, on the other hand, have not rallied as much, but their incremental margins have been equally consistent.
Investors are on high alert as analysts continue to speculate whether Silver Wheaton's stock price will take a dive or go up again.
What Investors Should Look Forward To
Silver Wheaton has put together a smart business model that allows for high profit margins in weak markets for precious metals. Being a streaming company, it simply buys gold and silver produced as by-products by companies mining for base metals such as iron, copper, zinc, etc. This is a brilliant and effective way of maintaining steady margins without incurring certain costs.
In an attempt to keep profits and consequently prices up, the company has to constantly look for new opportunities. And as a streaming company, these opportunities come at a discount. For instance, the company recently signed for an additional 25% gold output in the Vale’s Salobo copper mine in Brazil. This increased Silver Wheaton’s gold ownership at the mine to 75%. This exploration and others alike will ensure Silver Wheaton’s revenues continue to grow.
With some European countries and Japan gearing towards a negative interest rate regime, investing in gold and silver would be an ideal thing to do.
Conclusion
In summary, Silver Wheaton has a reputation of growing its stock price and would certainly fit  nicely in your portfolio. It is a bit early to say whether or not the stock will go on another surge but given the company’s activities, the future is bright.
Therefore, the stock would certainly represent a healthy investment for the long term. And if you are looking for a short-term investment, then you can still draw some motivation from the upsurge in gold and silver prices this year. As such, there is still some room for the stock price to go on another rally.
Disclosure: I have no position in any stock mentioned in this article.
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