NEW YORK (TheStreet) -- Silver Wheaton (SLW) shares are down 9.64% to $15.81 in morning trading on Tuesday after the Canadian mining company received a Canada Revenue Agency (CRA) proposal letter to reassess the company's tax burden.
The Canadian tax agency said that the company's streaming income earned in foreign units is subject to being taxed and represents an additional taxable income of about $565 million for the years between 2005 and 2010, according to Reuters.
The company said that it does not have to pay the extra taxes up front and that it will appeal the CRA's decision.
Silver Wheaton said that it would be liable for about $150 million in extra tax charges if its foreign income was taxed at the same rate as its Canadian income and that the CRA is also looking to levy a C$72 million fine against the company.
TheStreet Ratings team rates SILVER WHEATON CORP as a Hold with a ratings score of C. TheStreet Ratings 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 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 weak operating cash flow, a generally disappointing performance in the stock itself and deteriorating net income."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- SLW's debt-to-equity ratio is very low at 0.18 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, SLW has a quick ratio of 2.35, which demonstrates the ability of the company to cover short-term liquidity needs.
- The gross profit margin for SILVER WHEATON CORP is currently very high, coming in at 73.59%. 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 37.86% significantly outperformed against the industry.
- SLW, with its decline in revenue, slightly underperformed the industry average of 17.4%. Since the same quarter one year prior, revenues fell by 21.1%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Metals & Mining industry and the overall market on the basis of return on equity, SILVER WHEATON CORP has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- Net operating cash flow has decreased to $89.13 million or 22.38% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
- You can view the full analysis from the report here: SLW Ratings Report