Wheaton Precious Metals Corp (WPM)

[investora2z]

The Q3'13 earnings will be a trigger for Silver Wheaton. It has done relatively better compared to many peers. While many stocks have declined by more than 20% from the recent highs due to the correction in prices of precious metals, Silver Wheaton has fallen around 14%. On a 3 month basis, it has appreciated by 33% which highlights the out-performance. The company did not do too well in the last earnings, as the revenues declined by 17% and the net income fell by nearly 50%. The cash margins and operating cash flow declined. A recent article on seekingalpha predicts that the company may post an 11% increase in revenues in Q3'13 while the net margins may decline. The decline is expected to lower the dividends. Increased contribution of Gold to the company's revenues may put pressure on margins, and even the silver's profit margin will decline to around 80%. Gold is expected to contribute 32% to the revenues in Q3 compared to 29% in Q1'13. However, Silver Wheaton remains a preferred bet because of its low risk business model and higher profit margins compared to the gold mining companies. It is important that the correction in the prices of precious metals gets over soon. The outlook is still much better than what it was in June, and many believe that the June lows will hold, if tested. There have been more investments in smaller companies. Pershing Gold (PGLC) has obtained $20 million funding recently, with its Director Barry Honig making significant investments. This indicates the faith of the top managers in the prospects of the sector. The relative strength of Silver Wheaton indicates that it is a good bet for the long term provided the gold / silver prices show sustained strength. In case of a rebound, Silver Wheaton may do better.The valuations may start to get a bit stretched in case the stock goes much higher from here.