Wheaton Precious Metals Corp.'s (TSE:WPM) Earnings Haven't Escaped The Attention Of Investors

With a price-to-earnings (or "P/E") ratio of 70.2x Wheaton Precious Metals Corp. (TSE:WPM) may be sending very bearish signals at the moment, given that almost half of all companies in Canada have P/E ratios under 16x and even P/E's lower than 9x are not unusual. However, the P/E might be quite high for a reason and it requires further investigation to determine if it's justified.

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Recent times haven't been advantageous for Wheaton Precious Metals as its earnings have been rising slower than most other companies. It might be that many expect the uninspiring earnings performance to recover significantly, which has kept the P/E from collapsing. If not, then existing shareholders may be very nervous about the viability of the share price.

Check out our latest analysis for Wheaton Precious Metals

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Wheaton Precious Metals.

Does Growth Match The High P/E?

There's an inherent assumption that a company should far outperform the market for P/E ratios like Wheaton Precious Metals' to be considered reasonable.

Retrospectively, the last year delivered a decent 4.7% gain to the company's bottom line. Still, lamentably EPS has fallen 18% in aggregate from three years ago, which is disappointing. So unfortunately, we have to acknowledge that the company has not done a great job of growing earnings over that time.

Shifting to the future, estimates from the ten analysts covering the company suggest earnings should grow by 20% each year over the next three years. Meanwhile, the rest of the market is forecast to only expand by 9.7% per annum, which is noticeably less attractive.

In light of this, it's understandable that Wheaton Precious Metals' P/E sits above the majority of other companies. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

What We Can Learn From Wheaton Precious Metals' P/E?

Typically, we'd caution against reading too much into price-to-earnings ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

We've established that Wheaton Precious Metals maintains its high P/E on the strength of its forecast growth being higher than the wider market, as expected. At this stage investors feel the potential for a deterioration in earnings isn't great enough to justify a lower P/E ratio. Unless these conditions change, they will continue to provide strong support to the share price.

And what about other risks? Every company has them, and we've spotted 1 warning sign for Wheaton Precious Metals you should know about.

Of course, you might find a fantastic investment by looking at a few good candidates. So take a peek at this free list of companies with a strong growth track record, trading on a low P/E.

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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.