Why Silver Wheaton Corp (SLW) Lost Its Shine During Monday Trading

NEW YORK (TheStreet) -- Silver Wheaton Corp (SLW) wasn't immune from an industry-wide sell-off on gold mining stocks, despite the fact the company's gold output contributes only 0.04% to total production. Investors were feeling bearish across all precious metal miners on Monday after gold prices tumbled to their lowest levels since July.

The Vancouver-based miner shed 5.9% to $19.72, adding to the company's year-to-date losses of 45.3%.

Gold prices were lower after November manufacturing data came in at the highest levels since mid-2011, sparking concerns the Federal Reserve would begin tapering monetary stimulus. By late afternoon, bullion was selling 2.3% lower to $1,219.71 an ounce.

Others affected included Yamana Gold (AUY), Barrick Gold (ABX) and Eldorado Gold (EGO).

Gold investments have become unfavorable over the year as low inflation created an adverse environment and investors shirked precious metals for more preferable equities. Year to date, the SPDR Gold Trust  (GLD) has dropped 27.4% and the iShares Gold Trust  (IAU) has fallen 27.3%, while the S&P 500 climbed 26.6%.

TheStreet Ratings team rates Silver Wheaton Corp as a Hold with a ratings score of C+. The team has this to say about their recommendation:

"We rate Silver Wheaton Corp (SLW) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. 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 analysis by TheStreet Ratings Team goes as follows:

  • 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.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 43.44%, 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.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Metals & Mining industry. The net income has significantly decreased by 35.6% when compared to the same quarter one year ago, falling from $119.7 million to $77.06 million.
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