<div id="readability-page-1"><div><h3>Key Insights</h3><ul><li> Wheaton Precious Metals' estimated fair value is CA$186 based on 2 Stage Free Cash Flow to Equity </li> <li> With CA$161 share price, Wheaton Precious Metals appears to be trading close to its estimated fair value </li> <li>  Analyst price target for WPM is US$190, which is 2.1% above our fair value estimate </li> </ul><p>Today we'll do a simple run through of a valuation method used to estimate the attractiveness of Wheaton Precious Metals Corp. (TSE:WPM) as an investment opportunity  by taking the expected future cash flows and discounting them to their present value.  Our analysis will employ the Discounted Cash Flow (DCF) model.  There's really not all that much to it, even though it might appear quite complex.</p><p> Companies can be valued in a lot of ways, so we would point out that a DCF is not perfect for every situation.  If you still have some burning questions about this type of valuation, take a look at the Simply Wall St analysis model. </p><p>This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality.</p><h2> The Calculation </h2> <p> We are going to use a two-stage DCF model, which, as the name states, takes into account two stages of growth. The first stage is generally a higher growth period which levels off heading towards the terminal value, captured in the second 'steady growth' period.  In the first stage we need to estimate the cash flows to the business over the next ten years.   Where possible we use analyst estimates, but when these aren't available we extrapolate the previous free cash flow (FCF) from the last estimate or reported value. We assume companies with shrinking free cash flow will slow their rate of shrinkage, and that companies with growing free cash flow will see their growth rate slow, over this period. We do this to reflect that growth tends to slow more in the early years than it does in later years.  </p><p> Generally we assume that a dollar today is more valuable than a dollar in the future,  so we need to discount the sum of these future cash flows to arrive at a present value estimate: </p><h4> 10-year free cash flow (FCF) estimate </h4><table><tbody><tr><td> </td><td><strong>2026</strong></td><td><strong>2027</strong></td><td><strong>2028</strong></td><td><strong>2029</strong></td><td><strong>2030</strong></td><td><strong>2031</strong></td><td><strong>2032</strong></td><td><strong>2033</strong></td><td><strong>2034</strong></td><td><strong>2035</strong></td></tr><tr><td><strong> Levered FCF ($, Millions) </strong></td><td>US$1.66b</td><td>US$1.97b</td><td>US$2.33b</td><td>US$2.61b</td><td>US$2.85b</td><td>US$3.05b</td><td>US$3.23b</td><td>US$3.39b</td><td>US$3.54b</td><td>US$3.67b</td></tr><tr><td><strong>Growth Rate Estimate Source</strong></td><td>Analyst x4</td><td>Analyst x2</td><td>Analyst x1</td><td>Est @ 11.85%</td><td>Est @ 9.12%</td><td>Est @ 7.21%</td><td>Est @ 5.87%</td><td>Est @ 4.94%</td><td>Est @ 4.28%</td><td>Est @ 3.82%</td></tr><tr><td><strong> Present Value ($, Millions) Discounted @ 7.2% </strong></td><td>US$1.5k</td><td>US$1.7k</td><td>US$1.9k</td><td>US$2.0k</td><td>US$2.0k</td><td>US$2.0k</td><td>US$2.0k</td><td>US$2.0k</td><td>US$1.9k</td><td>US$1.8k</td></tr></tbody></table><p><i>(&#34;Est&#34; = FCF growth rate estimated by Simply Wall St)</i><br/><strong>Present Value of 10-year Cash Flow (PVCF)</strong> = US$19b</p><p> We now need to calculate the Terminal Value, which accounts for all the future cash flows after this ten year period.  For a number of reasons a very conservative growth rate is used that cannot exceed that of a country's GDP growth. In this case we have used the 5-year average of the 10-year government bond yield (2.8%) to estimate future growth. In the same way as with the 10-year 'growth' period, we discount future cash flows to today's value, using a cost of equity of 7.2%. </p><p><strong>Terminal Value (TV)</strong>= FCF<sub>2035</sub> × (1 + g) ÷ (r – g) = US$3.7b× (1 + 2.8%) ÷ (7.2%– 2.8%) = US$86b</p><p><strong>Present Value of Terminal Value (PVTV)</strong>= TV / (1 + r)<sup>10</sup>= US$86b÷ ( 1 + 7.2%)<sup>10</sup>= US$43b</p><p> The total value, or equity value, is then the sum of the present value of the future cash flows,  which in this case is US$62b.  To get the intrinsic value per share, we divide this by the total number of shares outstanding.  Compared to the current share price of CA$161, the company appears   about fair value    at a 13% discount to where the stock price trades currently.   Remember though, that this is just an approximate valuation, and like any complex formula - garbage in, garbage out. </p><figure><img height="760" src="https://imageproxy.pbkrs.com/https://images.simplywall.st/asset/chart/3103638-dcf-1-dark-2/1767350000270?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" width="1706" original-src="https://imageproxy.pbkrs.com/https://images.simplywall.st/asset/chart/3103638-dcf-1-dark-2/1767350000270"/><figcaption>TSX:WPM Discounted Cash Flow January 2nd 2026</figcaption></figure> <h2> Important Assumptions </h2><p> Now the most important inputs to a discounted cash flow are the discount rate, and of course, the actual cash flows.  Part of investing is coming up with your own evaluation of a company's future performance, so try the calculation yourself and check your own assumptions.  The DCF also does not consider the possible cyclicality of an industry, or a company's future capital requirements, so it does not give a full picture of a company's potential performance.  Given that we are looking at Wheaton Precious Metals as potential shareholders, the cost of equity is used as the discount rate, rather than the cost of capital (or weighted average cost of capital, WACC) which accounts for debt.  In this calculation we've used 7.2%, which is based on a levered beta of 1.048. Beta is a measure of a stock's volatility, compared to the market as a whole. We get our beta from the industry average beta of globally comparable companies, with an imposed limit between 0.8 and 2.0, which is a reasonable range for a stable business. </p> <p><span> Check out our latest analysis for Wheaton Precious Metals </span></p><h3>SWOT Analysis for Wheaton Precious Metals</h3><div><div><p><strong>Strength</strong></p><ul><li>Earnings growth over the past year exceeded the industry.</li></ul> <ul><li>Currently debt free.</li></ul> <ul>Balance sheet summary for WPM.</ul> </div><div><p><strong>Weakness</strong></p><ul><li>Dividend is low compared to the top 25% of dividend payers in the Metals and Mining market.</li></ul></div><div><p><strong>Opportunity</strong></p><ul><li>Annual earnings are forecast to grow faster than the Canadian market.</li></ul> <ul><li> Current share price is below our estimate of fair value.</li></ul> </div><div><p><strong>Threat</strong></p><ul><li>Revenue is forecast to grow slower than 20% per year.</li></ul> <ul> What else are analysts forecasting for WPM?</ul> </div></div><h2> Looking Ahead: </h2><p> Valuation is only one side of the coin in terms of building your investment thesis, and it  ideally won't be the sole piece of analysis you scrutinize for a company.  The DCF model is not a perfect stock valuation tool.  Instead the best use for a DCF model is to test certain assumptions and theories to see if they would lead to the company being undervalued or overvalued.  For instance, if the terminal value growth rate is adjusted slightly, it can dramatically alter the overall result.  For Wheaton Precious Metals, there are three  essential  items  you should consider: </p><ol> <li><strong>Financial Health</strong>: Does WPM have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.</li> <li> <strong>Future Earnings</strong>: How does WPM's growth rate compare to its peers and the wider market? Dig deeper into the analyst consensus number for the upcoming years by interacting with our free analyst growth expectation chart. </li><li> <strong>Other Solid Businesses</strong>: Low debt, high returns on equity and good past performance are fundamental to a strong business. Why not explore our interactive list of stocks with solid business fundamentals to see if there are other companies you may not have considered! </li> </ol><p> PS. Simply Wall St updates its DCF calculation for every Canadian stock every day, so if you want to find the intrinsic value of any other stock just search here.</p><div><p>Mobile Infrastructure for Defense and Disaster</p><p>The next wave in robotics isn't humanoid. Its fully autonomous towers delivering 5G, ISR, and radar in under 30 minutes, anywhere.</p><p>Get the investor briefing before the next round of contracts</p><p><span>Sponsored On Behalf of CiTech</span></p></div></div></div>

<p>Wheaton Precious Metals Corp. (TSE:WPM) has an estimated fair value of CA$186, with its current share price at CA$161, indicating it is trading close to fair value. Analysts have a price target of US$190, slightly above the fair value estimate. The valuation uses a two-stage Discounted Cash Flow (DCF) model, projecting future cash flows and discounting them to present value. The total equity value is estimated at US$62 billion, suggesting a 13% discount compared to the current share price. Key assumptions include a discount rate of 7.2% and consideration of future cash flows.</p>

Calculating The Fair Value Of Wheaton Precious Metals Corp. (TSE:WPM)