Demand for silver is expected to remain significantly high this year and beyond, driven by its end-use applications in various industries, including jewelry, electronics, automotive, and solar energy. In addition to strong industrial demand, silver is highly valued by investors. As a safe-haven metal, it can be a good hedge against inflation and an economic downturn.
Therefore, investors could consider buying quality silver stock Silvercorp Metals Inc. (SVM) for solid returns. On the other hand, it could be wise to hold Wheaton Precious Metals Corp. (WPM) and SilverCrest Metals Inc. (SILV) and wait for a better entry in these silver stocks.
Silver is considered one of the most versatile precious metals, with its demand driven by end uses ranging from silverware and electronics to industrial and technological applications. Silver demand in the form of bar and coin investment has considerably increased in recent years.
Moreover, demand for silver is getting a significant boost from the rapid deployment of clean energy technologies as a part of energy transitions, including the exponential growth in vehicle electrification, the adoption of 5G technologies, and the rapid shift to the solar energy sector. This precious metal is a great conductor of heat and electricity, making it suitable for use in solar panels.
According to the Silver Institute, all major silver demand categories achieved record highs last year, with total global silver demand posting a new high of 1.24 billion ounces, and the trend is expected to continue.
Silver soared toward $24.70 per ounce in July, the highest in two months, amid weakness in the dollar, rising concerns of low supply, and strong industrial demand. Evolving solar panel technologies underpin sharp upgrades in forecasts of silver demand.
Solar panel companies are projected to account for 14% of global silver consumption, up from 5% in 2014 and driving a 4% increase in consumption in 2023.
Economists at Commerzbank expect a $25 silver price by the end of this year. They cite record industrial demand coupled with that of silverware, jewelry, coins, and bars for the surge in silver prices. Also, they believe that prices would benefit from solid demand from China, the world’s largest consumer of silver, as the nation rolled back its COVID-19 restrictions.
Furthermore, Wheaton Precious Metals CEO Randy Smallwood expects silver to touch $30 a troy ounce and remain comfortably above $20 in 2023. Also, John La Forge, head of real asset strategy for Wells Fargo, thinks silver is in a super cycle and has a price target of $48 per troy ounce within the next five years.
While fundamentally sound silver stock SVM could be an ideal buy now for solid returns, investors could hold WPM and SILV and wait for a better entry point in these stocks.
Let’s discuss the fundamentals of these stocks in detail.
Stock to Buy:
Silvercorp Metals Inc. (SVM)
Based in Vancouver, Canada, SVM engages in the acquisition, exploration, development, and mining of mineral properties in China. The company mainly explores silver, gold, lead, and zinc metals.
SVM’s trailing-12-month gross profit margin of 55.70% is 96.2% higher than the 28.39% industry average. Likewise, the stock’s trailing-12-month EBITDA margin and net income margin of 40.48% and 9.90% are favorably higher than the industry averages of 28.39% and 17.38%, respectively.
In the fourth quarter that ended March 31, 2023, SVM mined 181,848 tonnes of ore, milled 179,393 tonnes of ore, and produced approximately 1.10 million ounces of silver, 1,000 ounces of gold, 10.90 million pounds of lead, and 3.60 million pounds of zinc.
During the quarter, the company sold nearly 1.10 million ounces of silver, 1,000 ounces of gold, 10 million pounds of lead, and 3.50 million pounds of zinc, for revenue of $34.10 million. Also, SVM’s working capital was $177.81 million as of March 31, 2023, while its cash and cash equivalents and short-term investments stood at $203.32 million.
Analysts expect SVM’s revenue and EPS for the fiscal year (ending March 2024) to increase 9.5% and 36.5% year-over-year to $227.98 million and $0.29, respectively. The company’s revenue and EPS for the fiscal year 2025 are expected to grow 9.2% and 29.1% from the prior year to $249 million and $0.37, respectively.
Shares of SVM have gained 28.9% over the past year to close the last trading session at $3.08.
SVM’s POWR Ratings reflect this strong outlook. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
SVM has a B grade in Sentiment and Quality. It is ranked first among 11 stocks in the Miners - Silver industry.
Beyond what is stated above, we’ve also rated SVM for Growth, Value, Momentum, and Stability. Get all SVM ratings here.
Stocks to Watch:
Wheaton Precious Metals Corp. (WPM)
Headquartered in Vancouver, Canada, WPM primarily sells precious metals in North America, Europe, and South America. The company produces and sells gold, silver, palladium, and cobalt deposits.
On May 16, WPM announced that its wholly owned subsidiary, Wheaton Precious Metals International Ltd., entered into a definitive Precious Metal Purchase Agreement with Lumina Gold Corp. (LUM) with respect to its 100% owned Cangrejos gold-copper project located in EI Oro Province, Ecuador.
“The Cangrejos Project is an excellent addition to Wheaton’s existing portfolio of high-quality, low-cost assets as it should provide accretive, long-term growth as well as significant exploration potential,” said Randy Smallwood, WPM’s President and CEO.
WPM’s trailing-12-month gross profit margin of 74.33% is 161.8% higher than the 28.39% industry average. Likewise, the stock’s trailing-12-month EBITDA margin and net income margin of 68.91% and 64.08% are significantly higher than the respective industry averages of 17.38% and 7.12%.
During the first quarter that ended March 31, 2023, WPM’s gold, silver, and palladium production were 73,037 ounces, 4,927 ounces, and 3,705 ounces, respectively. The company’s sales volume of gold, silver, and palladium stood at 62,605 ounces, 3,749 ounces, and 2,946 ounces, respectively.
However, WPM’s first-quarter revenue declined 30.2% from the prior year’s quarter to $214.47 million. Its adjusted net earnings were $104.43 million and $0.23 per share, compared to $158.01 million and $0.35, respectively. Also, the company’s operating cash flows were $135.10 million, down 35.8% year-over-year.
Analysts expect WPM’s revenue to increase 0.3% year-over-year to $1.07 billion for the fiscal year ending December 2023. The consensus EPS estimate of $1.18 for the current year reflects a 5.9% year-over-year improvement. But the company failed to surpass the consensus revenue and EPS estimates in three of the trailing four quarters, which is disappointing.
Shares of WPM have gained 27.3% over the past year to close the last trading session at $44.61. However, the stock declined 1.1% over the past month.
WPM’s mixed fundamentals are reflected in its POWR Ratings. The stock has an overall rating of C, translating to a Neutral in our proprietary rating system.
WPM has a B grade for Quality. It has a C grade for Stability and Momentum. It is ranked #3 out of 11 stocks within the Miners - Silver industry.
In addition to the POWR Ratings I’ve just highlighted, you can see WPM’s ratings for Sentiment, Growth, and Value here.
SilverCrest Metals Inc. (SILV)
SILV engages in the exploration and development of precious metal properties in Mexico. It mainly explores for silver and gold properties. The company’s principal property includes the Las Chispas Mine, consisting of 28 concessions totaling of nearly 1,401 hectares located in Sonora, Mexico. SILV is headquartered in Vancouver, Canada.
On June 8, SILV announced the commencement of a multi-kilometer trenching program to expose six targets on the surface at its Ranger-Page Project located in the Silver Valley of North Idaho, USA. The early success at Crown Point in exposing vein structures at the surface validates the first phase mineralization identification program from 2022.
Furthermore, the final phase of exploratory work, refining drill targeting and de-risking the inaugural drill campaign, is expected to commence later this year.
SILV’s trailing-12-month gross profit margin and EBITDA margin of 63.08% and 53.79% are 122.2% and 209.6% higher than the industry averages of 28.39% and 17.38%, respectively. However, the stock’s trailing-12-month levered FCF margin of negative 56.6% compares to the industry average of 3.55%.
During the first quarter that ended March 31, 2023, SILV’s recovered 13,300 ounces of gold and 1.29 million ounces of silver. The company sold 14,200 ounces of gold and 1.36 million oz of silver at the average realized prices of $1,879 per oz and $23 per oz, respectively.
SILV’s first-quarter revenue increased 42.2% quarter-on-quarter to $58 million. The company’s mine operating income was $35.60 million, an increase of 34.3% sequentially. In addition, its income for the period and income per share were $27.20 million and $0.18, compared to $5.20 million and $0.03 in the fourth quarter of 2022, respectively.
Analysts expect SILV’s revenue for the fiscal year (ending December 2024) to grow 36.2% year-over-year to $235.30 million. But the company’s EPS for the same period is expected to decrease 13.1% year-over-year to $0.55.
Over the past year, SILV’s stock has gained 8.7% to close the last trading session at $6.15. However, the stock has slumped 7.9% over the past six months.
SILV’s POWR Ratings reflect this mixed outlook. The stock has an overall rating of C, which translates to a Neutral in our proprietary rating system.
SILV has a B grade for Growth. It has a C grade for Value, Sentiment, and Quality. It is ranked #2 out of 11 stocks in the same industry.
To access additional ratings for SILV’s Stability and Momentum, click here.
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WPM shares were trading at $44.78 per share on Friday morning, up $0.17 (+0.38%). Year-to-date, WPM has gained 15.31%, versus a 18.83% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.
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