Here's Why We Think Wheaton Precious Metals (TSE:WPM) Is Well Worth Watching

The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Wheaton Precious Metals (TSE:WPM). While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.

Check out the opportunities and risks within the CA Metals and Mining industry.

Wheaton Precious Metals' Improving Profits

Wheaton Precious Metals has undergone a massive growth in earnings per share over the last three years. So much so that this three year growth rate wouldn't be a fair assessment of the company's future. So it would be better to isolate the growth rate over the last year for our analysis. Wheaton Precious Metals' EPS shot up from US$1.38 to US$1.76; a result that's bound to keep shareholders happy. That's a impressive gain of 28%.

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. Wheaton Precious Metals' EBIT margins have actually improved by 12.3 percentage points in the last year, to reach 63%, but, on the flip side, revenue was down 8.5%. That falls short of ideal.

You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.

The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. While crystal balls don't exist, you can check our visualization of consensus analyst forecasts for Wheaton Precious Metals' future EPS 100% free.

Are Wheaton Precious Metals Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a CA$24b company like Wheaton Precious Metals. But we do take comfort from the fact that they are investors in the company. To be specific, they have US$32m worth of shares. That shows significant buy-in, and may indicate conviction in the business strategy. Despite being just 0.1% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.

It means a lot to see insiders invested in the business, but shareholders may be wondering if remuneration policies are in their best interest. Well, based on the CEO pay, you'd argue that they are indeed. The median total compensation for CEOs of companies similar in size to Wheaton Precious Metals, with market caps over US$8.0b, is around US$7.6m.

Wheaton Precious Metals' CEO took home a total compensation package worth US$5.0m in the year leading up to December 2021. That comes in below the average for similar sized companies and seems pretty reasonable. CEO remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. It can also be a sign of a culture of integrity, in a broader sense.

Does Wheaton Precious Metals Deserve A Spot On Your Watchlist?

You can't deny that Wheaton Precious Metals has grown its earnings per share at a very impressive rate. That's attractive. If you need more convincing beyond that EPS growth rate, don't forget about the reasonable remuneration and the high insider ownership. The overarching message here is that Wheaton Precious Metals has underlying strengths that make it worth a look at. Still, you should learn about the 1 warning sign we've spotted with Wheaton Precious Metals.

Although Wheaton Precious Metals certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see insider buying, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.