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Wheaton Precious Metals
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=== Valuation: Medium-term c US$60; potentially US$66.34 now === Using a CAPM method to value WPM and applying a nominal discount rate of 9.0% to cash flows implies a ‘terminal’ valuation for the company at end-FY26 of US$59.98 (C$77.83) per share assuming zero subsequent long-term growth in real cash flows. Otherwise, excluding FY04 (part-year), WPM’s shares have historically traded on an average P/E multiple of 30.1x current year basic underlying EPS, excluding impairments. Applying this 30.1x multiple to Edison's EPS forecast of US$2.06 in FY26 implies a potential value per share for WPM of US$62.02 or C$80.47 in that year, which implies a long-term cash flow per share growth rate of 4.3% at that time. In the event of a return to favour of precious metals, however, Edison Investment Research believes that a multiple of 38.6x earnings (the average of FY18, FY19, FY20 and FY21) may be supported, in which case Edison believe that a near-term valuation of US$66.34, or C$86.08, per share is achievable. Even at such a multiple, WPM’s shares would trade at little more than par relative to those of Franco-Nevada currently (see Exhibit 18). In the meantime, WPM is cheaper than its peers on 72% of commonly used valuation measures using Edison forecasts or 61% using consensus forecasts.
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