This Just In: Upgrades and Downgrades – Molycorp Inc (MCP), Silver Wheaton Corp. (SLW)

Silver Wheaton Corp. (USA) (NYSE:SLW)

Finally, Silver Wheaton. The numbers here look good. The company just finished negotiating the purchase of gold production streams from Vale‘s Salobo and Sudbury mines, a deal that the Fool’s favorite mining analyst, Christopher Barker, recently termed “a monumental score.”

He’s not the only one. Credit Suisse upgraded Silver Wheaton to outperform on Wednesday, citing the Vale deal as its reason. Scotia Capital yesterday followed suit, and what’s more, said the deal could lift Silver Wheaton shares as high as $53 within a year — which would make for a 43% profit from today’s share price.

Most analysts, in fact, would probably recommend the stock on its growth rate alone. On Wall Street, Silver Wheaton’s pegged for an astounding 68% annualized rate of profits growth over the next five years, a number so high as to justify almost any P/E ratio. But here’s the thing…

After a truly fabulous 2011, Silver Wheaton’s cash flow statement showed the company plunging deeply into the red in 2012. With a free cash flow number that’s now at negative $10 million, as much as I like Silver Wheaton’s business model, I can no longer endorse the stock. Effective immediately, I’m closing out my “outperform” CAPScall on Motley Fool CAPS. To date, this call has earned me a 28-point victory over the market — but that was then, and this is now. At Silver Wheaton’s current overvalued price, I see no reason to push my luck.

The article This Just In: Upgrades and Downgrades originally appeared on Fool.com and is written by Rich Smith.

Fool contributor Rich Smith has no positions in the stocks mentioned above. You can find him on CAPS, publicly pontificating under the handle TMFDitty, where he’s currently ranked No. 342 out of more than 180,000 members. The Motley Fool has no position in any of the stocks mentioned.

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