Robust Earnings May Not Tell The Whole Story For Wheaton Precious Metals (TSE:WPM)

Wheaton Precious Metals Corp. (TSE:WPM) just released a solid earnings report, and the stock displayed some strength. However, we think that shareholders should be cautious as we found some worrying factors underlying the profit.

Our analysis indicates that WPM is potentially overvalued!

How Do Unusual Items Influence Profit?

To properly understand Wheaton Precious Metals' profit results, we need to consider the US$104m gain attributed to unusual items. We can't deny that higher profits generally leave us optimistic, but we'd prefer it if the profit were to be sustainable. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. Which is hardly surprising, given the name. If Wheaton Precious Metals doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year.

That might leave you wondering what analysts are forecasting in terms of future profitability. Luckily, you can click here to see an interactive graph depicting future profitability, based on their estimates.

Our Take On Wheaton Precious Metals' Profit Performance

Arguably, Wheaton Precious Metals' statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that Wheaton Precious Metals' true underlying earnings power is actually less than its statutory profit. But the good news is that its EPS growth over the last three years has been very impressive. The goal of this article has been to assess how well we can rely on the statutory earnings to reflect the company's potential, but there is plenty more to consider. If you'd like to know more about Wheaton Precious Metals as a business, it's important to be aware of any risks it's facing. At Simply Wall St, we found 1 warning sign for Wheaton Precious Metals and we think they deserve your attention.

This note has only looked at a single factor that sheds light on the nature of Wheaton Precious Metals' profit. But there is always more to discover if you are capable of focussing your mind on minutiae. For example, many people consider a high return on equity as an indication of favorable business economics, while others like to 'follow the money' and search out stocks that insiders are buying. While it might take a little research on your behalf, you may find this free collection of companies boasting high return on equity, or this list of stocks that insiders are buying to be useful.

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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.