If a gold stock has outperformed gold's 90% gain over the last year, I'm interested. If it's also outperformed gold over the last five years, returning 221% to gold's 187%, I'm wondering if it's a durable trend. And if the company has returned 4,153% since going public in 2005, compared to gold's 1,012% rise in that time frame, my only question is if that outperformance can continue.
Even more striking, the company in question achieved this feat with just 44 full-time employees, which means that last quarter, it brought in $35 million in gross profit per full-time employee. It doesn't operate any precious metals mines, which can be risky and expensive. It even pays a dividend, which, while not enormous with its yield of 0.43%, is still something that no precious metal investment provides.
So, how does this company do it? And can this continue? Here's what the numbers say.
Image source: Getty Images.
Up to 80% discounts on precious metals
The company featured here is Wheaton Precious Metals (WPM 1.80%), a Vancouver-based precious metals company that has never mined a single ounce of gold or silver.
Instead, this $60 billion company operates through a business model known as streaming, in which it provides upfront financing to mining projects in return for the right to buy a portion of the mine's future output at a discounted price.
For instance, last September the company inked a deal with Hemlo Mining in which it provided $300 million in financing in return for the right to buy 10.13% of its gold output, up to a limit of 136,000 ounces of payable gold, with Wheaton Precious Metals paying just 20% of gold's spot price.
After the first 136,000 ounces of gold have been sold at this 80% discount, the company then has another "dropdown threshold" with the right to buy 6.75% of payable gold until 118,000 ounces have been delivered. After that, Wheaton Precious Metals will have the right to buy 4.5% of the rest of the mine's payable gold, up through the remaining life of the mine. In all of these dropdown thresholds, the company can buy at the 80% discount to the spot price.
NYSE: WPM
Key Data Points
Wheaton Precious Metals has a lucrative business model
You can see how lucrative this business model is just with the first dropdown threshold. With gold prices currently at $4,893 per ounce, the first 136,000 ounces that Wheaton Precious Metals can buy would cost just $133 million, yet be worth $665.5 million on the open market. This leaves a $232.5 million profit if you take into account the $300 million that Wheaton Precious Metals provided in financing, and that's without considering the other dropdown thresholds.
With dozens of similar agreements with mines around the world, it's no wonder, then, that this company reliably outperforms gold. As of an investor presentation on Jan. 7, 2026, shares had beaten gold over the last one-year, three-year, five-year, and 10-year intervals, often by around 2-to-1.
One risk to the stock is a drawdown in gold prices, which reduces its profit margins. But even then, its discounts of up to 80% on mines' outputs give the company considerable protection. For investors eager to tap into this gold boom, Wheaton Precious Metals is a buy.
