When silver fetched just $16.90 per ounce a little more than two years ago, I offered my readers 13.6 billion reasons to adore Silver Wheaton
Forty-three million of those reasons correspond to the silver streamer's monster haul of 43 million silver-equivalent ounces (SEOs) annually by 2015. From anticipated 2012 production of 27 million SEOs, that's nearly a 60% growing spree in the span of three years.
Now that Goldcorp's
Pondering Silver Wheaton's future profitability at the looming scale of 43 million ounces offers more sheer fun per number-crunching step than any other stock out there. With an essentially fixed cash cost structure of just over $4 per ounce, a Fool has only to plug in his or her own silver-price forecasts for a glimpse of the profits to come.
As a baseline, consider that Silver Wheaton yielded $550 million in net profit for 2011 based upon sales of 21 million SEOs at an average realized price of $34.65 per SEO. With a net profit margin of 76% -- a product of the company's ingenious business model -- it's no wonder I've called Silver Wheaton the most profitable company in the world.
So, in a back-of-the-envelope sort of way, if we apply the 2011 realized silver price to 2015 sales volume of about 40 million ounces (allowing for some lag between production and sales volumes), we could expect to see 2015 net earnings of about $1.05 billion. By those metrics, Silver Wheaton currently trades for just over 11 times 2015 earnings. If, however, you believe that silver is more likely to average $50 per ounce in 2015, then the multiple drops down to less than 8 times 2015 earnings.
Of course, with a cash balance of $840 million that's hungering to fund additional accretive stream transactions -- not to mention the potential addition of currently stalled streams from projects such as Pan American Silver's
Fool contributor Christopher Barker can be found blogging actively and acting Foolishly within the CAPS community under the username TMFSinchiruna. He tweets. He owns shares of First Majestic Silver, Goldcorp, Pan American Silver, and Silver Wheaton. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.