Examining Wheaton Precious Metals Corp’s (TSX:WPM) past track record of performance is a valuable exercise for investors. It enables us to understand whether the company has met or exceed expectations, which is a powerful signal for future performance. Below, I will assess WPM’s latest performance announced on 31 December 2017 and weigh these figures against its longer term trend and industry movements. See our latest analysis for Wheaton Precious Metals
Was WPM weak performance lately part of a long-term decline?
For the purpose of this commentary, I like to use data from the most recent 12 months, which either annualizes the most recent 6-month earnings update, or in some cases, the most recent annual report is already the latest available financial data. This technique enables me to assess different stocks on a similar basis, using new information. For Wheaton Precious Metals, its most recent bottom-line (trailing twelve month) is US$57.70M, which, against last year’s level, has fallen by a large -70.43%. Given that these values may be somewhat short-term, I have created an annualized five-year value for WPM’s earnings, which stands at US$274.12M This doesn’t seem to paint a better picture, since earnings seem to have gradually been deteriorating over time.
Why could this be happening? Well, let’s take a look at what’s occurring with margins and whether the rest of the industry is facing the same headwind. Revenue growth over the last few years, has been positive, yet earnings growth has been deteriorating. This suggest that Wheaton Precious Metals has been ramping up expenses, which is hurting margins and earnings, and is not a sustainable practice. Inspecting growth from a sector-level, the Canadian metals and mining industry has been growing its average earnings by double-digit 24.81% over the past twelve months, and 16.35% over the past half a decade. This shows that any tailwind the industry is benefiting from, Wheaton Precious Metals has not been able to gain as much as its industry peers.
What does this mean?
Wheaton Precious Metals’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Typically companies that face a drawn out period of diminishing earnings are going through some sort of reinvestment phase in order to keep up with the latest industry growth and disruption. I recommend you continue to research Wheaton Precious Metals to get a better picture of the stock by looking at:
- 1. Future Outlook: What are well-informed industry analysts predicting for WPM’s future growth? Take a look at our free research report of analyst consensus for WPM’s outlook.
- 2. Financial Health: Is WPM’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
- 3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
NB: Figures in this article are calculated using data from the trailing twelve months from 31 December 2017. This may not be consistent with full year annual report figures.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.