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Trade-Ideas: Silver Wheaton Corporation (SLW) Is Today's "Storm The Castle" Stock

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

Trade-Ideas LLC identified Silver Wheaton Corporation ( SLW) as a "storm the castle" (crossing above the 200-day simple moving average on higher than normal relative volume) candidate. In addition to specific proprietary factors, Trade-Ideas identified Silver Wheaton Corporation as such a stock due to the following factors:

  • SLW has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $97.6 million.
  • SLW has traded 460,775 shares today.
  • SLW is trading at 2.39 times the normal volume for the stock at this time of day.
  • SLW crossed above its 200-day simple moving average.

'Storm the Castle' stocks are worth watching because trading stocks that begin to experience a breakout can lead to potentially massive profits. Once psychological and technical resistance barriers like the 200-day moving average are breached on higher than normal relative volume, the stock is then free to find new buyers and momentum traders who can ultimately push the stock significantly higher. Regardless of the impetus behind the price and volume action, when a stock moves with strength and volume it can indicate the start of a new trend on which early investors can capitalize on. In the event of a well-timed trading opportunity, combining technical indicators with fundamental trends and a disciplined trading methodology should help you take the first steps towards investment success.

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More details on SLW:

Silver Wheaton Corp., together with its subsidiaries, operates as silver and gold streaming company worldwide. The company has 20 long-term purchase agreements associated with silver and gold relating to 23 mining assets. The stock currently has a dividend yield of 1.6%. SLW has a PE ratio of 17.5. Currently there are 16 analysts that rate Silver Wheaton Corporation a buy, no analysts rate it a sell, and 1 rates it a hold.

The average volume for Silver Wheaton Corporation has been 4.8 million shares per day over the past 30 days. Silver Wheaton has a market cap of $8.1 billion and is part of the basic materials sector and metals & mining industry. Shares are up 9.7% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Silver Wheaton Corporation as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, deteriorating net income and weak operating cash flow.

Highlights from the ratings report include:

  • Despite its growing revenue, the company underperformed as compared with the industry average of 3.9%. Since the same quarter one year prior, revenues slightly increased by 3.2%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • The current debt-to-equity ratio, 0.31, is low and is below the industry average, implying that there has been successful management of debt levels. Along with this, the company maintains a quick ratio of 3.25, which clearly demonstrates the ability to cover short-term cash needs.
  • The gross profit margin for SILVER WHEATON CORP is currently very high, coming in at 77.76%. Regardless of SLW's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, SLW's net profit margin of 46.30% significantly outperformed against the industry.
  • Net operating cash flow has declined marginally to $118.67 million or 7.75% when compared to the same quarter last year. In conjunction, when comparing current results to the industry average, SILVER WHEATON CORP has marginally lower results.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 40.01%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 35.29% compared to the year-earlier quarter. Although its share price is down sharply from a year ago, do not assume that it can now be tagged as cheap and attractive. The reality is that, based on its current price in relation to its earnings, SLW is still more expensive than most of the other companies in its industry.

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