Should you Bet on Silver Wheaton's Turnaround?

Shares of Silver Wheaton (SLW) have taken a beating this year as the company has witnessed significant drop in revenue due to the weakness in commodities. Although the company’s sales are still down, I think the stock is a good speculative buy and investors can expect a recovery going forward.

Silver Wheaton’s latest earnings report didn’t help its share price as the company missed the analysts’ estimates on both fronts. In Q3FY15, Silver Wheaton shared earnings per share of $0.12, $0.01 less than the consensus estimate of $0.13.
In addition, the company reported revenue of $153.3 million compared to analysts’ estimate of $169.14 million.

Despite the revenue and earnings miss, the company somehow managed to show some signs of a potential recovery. The finest news for the company is that its production and sales volume have endured to move on the right track. In November, the company produced record results, hitting 11 million ounces of silver manufacture and 10.2 million ounces sold.

In spite of rushed metal prices, the company has still made some positive moves that have paid off this year. The company’s expansion into the gold sector has offered Silver Wheaton a superior ability to extract profit from the profitable prospects in the mining industry. For instance, in 2015, there was massive growth in the Salobo project with Vale, whereas many of the Silver Wheaton’s primary partnerships grieved profit and revenue declines.

The company has vast experience in the silver market, but its deals with gold manufacturers has also showed strong results. In 2015, due to the Salobo project, the company saw its total revenue almost double during the first three quarters versus the same period in 2014.

Silver Wheaton started Salobo in 2013. It accounts for the part of a bigger deal with Vale in which the company offered Brazilian miner an amount of $1.9 billion along with the warrants to buy 10 million Silver Wheaton shares over a decade. The company also committed to pay $400 per ounce for the gold conveyed under the streaming contract.

The Salobo project acts as a game changer for the company and the company projected average gold production of 60,000 ounces every year for the next 20 years. Furthermore, with growth possibilities available, Salobo held potential for future contracts with Silver Wheaton.


In my opinion, investors should ignore the company’s bad earnings report as there are many signs pointing toward a potential recovery. Silver Wheaton’s Salobo project will help it perform better during the downturn and can fuel a recovery in the near future. Hence, I think the stock is a good speculative buy.
Published on Dec 30, 2015
By Akshansh Gandhi

Copyrighted 2020. Content published with author's permission.

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