Top Gold Stock with High Growth Potential and Low Risk

Written by Amy Legate-Wolfe at The Motley Fool Canada

The price of gold is dropping. Canadians have seen the price rise higher among higher-for-longer interest rates. Yet, with the interest rate dropping to 4.75% last week, Canadian investors have now seen a shift.

The price of gold is coming down as Canadians look to invest beyond gold. But before you take out your cash, it’s important to note that investing in gold is different than investing in gold companies. And it’s certainly different than investing in gold streaming companies.

This is why today we’re going to look at one gold stock that remains a buy. In fact, it remains a strong buy, considering it offers more growth and less risk. So, let’s get into why Wheaton Precious Metals (TSX:WPM) might belong in your portfolio.

About WPM stock

WPM stock is a prominent streaming company. It’s considered by many investors as a potential candidate for those seeking growth with relatively less risk in the precious metals sector. The company’s unique business model, recent earnings performance, and strategic outlook provide a comprehensive basis for evaluating its investment potential.

The company’s stock has demonstrated solid performance on the TSX, reflecting investor confidence and the company’s robust fundamentals. Over the past year, WPM’s share price has appreciated by approximately 15%, outperforming many peers in the precious metals sector. This upward trend is indicative of the market’s positive perception of Wheaton’s strategic position and growth prospects.

Furthermore, WPM stock has also shown resilience in the face of market volatility. This is a testament to the defensive nature of its business model. The predictability of cash flows from streaming contracts provides a cushion against broader market swings. This offers a level of stability that is attractive to risk-averse investors.

Insight into Wheaton Precious Metals

One key insight into Wheaton Precious Metals is its strategic focus on precious metals such as gold and silver. These metals historically perform well in inflationary environments, providing a hedge against economic uncertainties. This strategic positioning gives Wheaton an advantage in benefitting from the current geopolitical tensions and inflationary pressures, which are expected to support strong gold prices in the future.

Looking at earnings

This predictability was seen over and over again during the company’s earnings reports. WPM stock reported robust financial performance in recent quarters, showcasing its ability to generate substantial revenue and profit through its streaming agreements. In the first quarter (Q1) of 2024, the company reported revenues of approximately $270 million, reflecting a year-over-year increase driven by higher production volumes and stronger metal prices.

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Net earnings also saw a significant boost, reaching $135 million, up from $120 million in the same period of the previous year. This consistent performance underscores the stability and growth potential inherent in Wheaton’s business model.

The company’s earnings are buoyed by long-term streaming agreements with various mining companies. This provides Wheaton with the right to purchase a portion of the metals produced at predetermined prices. This model reduces operational risks typically associated with mining, such as cost overruns and production issues, and ensures a steady stream of precious metals at favourable costs.

More ahead

Looking forward, WPM stock is well-positioned for continued growth. The company has a strong pipeline of streaming agreements, and recent acquisitions have expanded its portfolio, enhancing future revenue potential. For instance, the addition of new streaming deals with mines in Mexico and Brazil is expected to contribute significantly to production volumes over the next few years.

Furthermore, Wheaton focuses on precious metals such as gold and silver. This historically performs well in inflationary environments and provides a hedge against economic uncertainties. With gold prices expected to remain strong due to geopolitical tensions and inflationary pressures, Wheaton’s earnings are likely to benefit from favourable market conditions.

So, with less risk, more expansion, and compelling stability, WPM stock continues to be a strong choice on the TSX today — especially as shares continue to rise and with a dividend yield currently at 1.12%.

The post 1 Gold Stock to Buy for More Growth, Less Risk appeared first on The Motley Fool Canada.

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Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

2024