Intrinsic value of Barrick Gold Corporation - ABX

Previous Close

$17.57

  Intrinsic Value

$1.90

stock screener

  Rating & Target

str. sell

-89%

Previous close

$17.57

 
Intrinsic value

$1.90

 
Up/down potential

-89%

 
Rating

str. sell

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of ABX stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 20.5

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  -5.21
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  11,563
  11,794
  12,066
  12,376
  12,724
  13,109
  13,533
  13,994
  14,492
  15,030
  15,607
  16,224
  16,882
  17,583
  18,328
  19,119
  19,957
  20,844
  21,782
  22,773
  23,819
  24,923
  26,088
  27,315
  28,608
  29,970
  31,404
  32,913
  34,501
  36,172
  37,930
Variable operating expenses, $m
 
  14,857
  15,195
  15,580
  16,013
  16,493
  17,020
  17,593
  18,214
  18,882
  19,600
  20,182
  21,001
  21,873
  22,800
  23,784
  24,826
  25,929
  27,096
  28,329
  29,631
  31,004
  32,453
  33,979
  35,588
  37,282
  39,066
  40,944
  42,919
  44,998
  47,184
Fixed operating expenses, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  8,288
  14,857
  15,195
  15,580
  16,013
  16,493
  17,020
  17,593
  18,214
  18,882
  19,600
  20,182
  21,001
  21,873
  22,800
  23,784
  24,826
  25,929
  27,096
  28,329
  29,631
  31,004
  32,453
  33,979
  35,588
  37,282
  39,066
  40,944
  42,919
  44,998
  47,184
Operating income, $m
  3,275
  -3,063
  -3,129
  -3,205
  -3,290
  -3,384
  -3,487
  -3,599
  -3,721
  -3,852
  -3,993
  -3,958
  -4,119
  -4,290
  -4,472
  -4,665
  -4,869
  -5,086
  -5,314
  -5,556
  -5,811
  -6,081
  -6,365
  -6,664
  -6,980
  -7,312
  -7,662
  -8,030
  -8,418
  -8,825
  -9,254
EBITDA, $m
  5,402
  -894
  -914
  -938
  -964
  -993
  -1,025
  -1,060
  -1,098
  -1,139
  -1,182
  -1,229
  -1,279
  -1,332
  -1,389
  -1,449
  -1,512
  -1,579
  -1,650
  -1,725
  -1,805
  -1,888
  -1,977
  -2,070
  -2,168
  -2,271
  -2,379
  -2,494
  -2,614
  -2,741
  -2,874
Interest expense (income), $m
  693
  600
  626
  657
  693
  733
  777
  825
  878
  935
  997
  1,063
  1,133
  1,209
  1,289
  1,374
  1,465
  1,560
  1,662
  1,769
  1,883
  2,002
  2,129
  2,262
  2,403
  2,551
  2,706
  2,871
  3,043
  3,225
  3,416
Earnings before tax, $m
  2,402
  -3,663
  -3,755
  -3,862
  -3,982
  -4,116
  -4,264
  -4,425
  -4,599
  -4,787
  -4,989
  -5,021
  -5,252
  -5,499
  -5,761
  -6,039
  -6,334
  -6,646
  -6,976
  -7,325
  -7,694
  -8,083
  -8,494
  -8,927
  -9,382
  -9,863
  -10,369
  -10,901
  -11,461
  -12,051
  -12,671
Tax expense, $m
  1,239
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Net income, $m
  885
  -3,663
  -3,755
  -3,862
  -3,982
  -4,116
  -4,264
  -4,425
  -4,599
  -4,787
  -4,989
  -5,021
  -5,252
  -5,499
  -5,761
  -6,039
  -6,334
  -6,646
  -6,976
  -7,325
  -7,694
  -8,083
  -8,494
  -8,927
  -9,382
  -9,863
  -10,369
  -10,901
  -11,461
  -12,051
  -12,671

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  3,228
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  34,134
  31,535
  32,261
  33,090
  34,021
  35,052
  36,184
  37,416
  38,750
  40,187
  41,729
  43,379
  45,140
  47,014
  49,007
  51,121
  53,361
  55,732
  58,240
  60,890
  63,688
  66,640
  69,753
  73,034
  76,492
  80,134
  83,968
  88,003
  92,250
  96,718
  101,417
Adjusted assets (=assets-cash), $m
  30,906
  31,535
  32,261
  33,090
  34,021
  35,052
  36,184
  37,416
  38,750
  40,187
  41,729
  43,379
  45,140
  47,014
  49,007
  51,121
  53,361
  55,732
  58,240
  60,890
  63,688
  66,640
  69,753
  73,034
  76,492
  80,134
  83,968
  88,003
  92,250
  96,718
  101,417
Revenue / Adjusted assets
  0.374
  0.374
  0.374
  0.374
  0.374
  0.374
  0.374
  0.374
  0.374
  0.374
  0.374
  0.374
  0.374
  0.374
  0.374
  0.374
  0.374
  0.374
  0.374
  0.374
  0.374
  0.374
  0.374
  0.374
  0.374
  0.374
  0.374
  0.374
  0.374
  0.374
  0.374
Average production assets, $m
  19,645
  20,038
  20,499
  21,026
  21,618
  22,273
  22,992
  23,775
  24,623
  25,536
  26,516
  27,564
  28,683
  29,874
  31,140
  32,483
  33,907
  35,414
  37,007
  38,691
  40,469
  42,345
  44,323
  46,408
  48,605
  50,919
  53,355
  55,920
  58,618
  61,457
  64,443
Working capital, $m
  4,127
  1,109
  1,134
  1,163
  1,196
  1,232
  1,272
  1,315
  1,362
  1,413
  1,467
  1,525
  1,587
  1,653
  1,723
  1,797
  1,876
  1,959
  2,047
  2,141
  2,239
  2,343
  2,452
  2,568
  2,689
  2,817
  2,952
  3,094
  3,243
  3,400
  3,565
Total debt, $m
  10,715
  10,985
  11,530
  12,152
  12,852
  13,626
  14,476
  15,401
  16,403
  17,482
  18,641
  19,880
  21,202
  22,610
  24,106
  25,694
  27,376
  29,157
  31,040
  33,030
  35,131
  37,348
  39,686
  42,151
  44,747
  47,482
  50,362
  53,392
  56,582
  59,937
  63,466
Total liabilities, $m
  23,413
  23,683
  24,228
  24,850
  25,550
  26,324
  27,174
  28,099
  29,101
  30,180
  31,339
  32,578
  33,900
  35,308
  36,804
  38,392
  40,074
  41,855
  43,738
  45,728
  47,829
  50,046
  52,384
  54,849
  57,445
  60,180
  63,060
  66,090
  69,280
  72,635
  76,164
Total equity, $m
  10,721
  7,852
  8,033
  8,239
  8,471
  8,728
  9,010
  9,317
  9,649
  10,007
  10,391
  10,801
  11,240
  11,707
  12,203
  12,729
  13,287
  13,877
  14,502
  15,162
  15,858
  16,593
  17,368
  18,186
  19,047
  19,953
  20,908
  21,913
  22,970
  24,083
  25,253
Total liabilities and equity, $m
  34,134
  31,535
  32,261
  33,089
  34,021
  35,052
  36,184
  37,416
  38,750
  40,187
  41,730
  43,379
  45,140
  47,015
  49,007
  51,121
  53,361
  55,732
  58,240
  60,890
  63,687
  66,639
  69,752
  73,035
  76,492
  80,133
  83,968
  88,003
  92,250
  96,718
  101,417
Debt-to-equity ratio
  0.999
  1.400
  1.440
  1.470
  1.520
  1.560
  1.610
  1.650
  1.700
  1.750
  1.790
  1.840
  1.890
  1.930
  1.980
  2.020
  2.060
  2.100
  2.140
  2.180
  2.220
  2.250
  2.280
  2.320
  2.350
  2.380
  2.410
  2.440
  2.460
  2.490
  2.510
Adjusted equity ratio
  0.242
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  885
  -3,663
  -3,755
  -3,862
  -3,982
  -4,116
  -4,264
  -4,425
  -4,599
  -4,787
  -4,989
  -5,021
  -5,252
  -5,499
  -5,761
  -6,039
  -6,334
  -6,646
  -6,976
  -7,325
  -7,694
  -8,083
  -8,494
  -8,927
  -9,382
  -9,863
  -10,369
  -10,901
  -11,461
  -12,051
  -12,671
Depreciation, amort., depletion, $m
  2,127
  2,169
  2,215
  2,267
  2,326
  2,390
  2,462
  2,539
  2,623
  2,714
  2,811
  2,729
  2,840
  2,958
  3,083
  3,216
  3,357
  3,506
  3,664
  3,831
  4,007
  4,193
  4,388
  4,595
  4,812
  5,041
  5,283
  5,537
  5,804
  6,085
  6,380
Funds from operations, $m
  1,217
  -1,493
  -1,540
  -1,595
  -1,657
  -1,726
  -1,802
  -1,885
  -1,976
  -2,074
  -2,179
  -2,292
  -2,412
  -2,541
  -2,677
  -2,823
  -2,977
  -3,140
  -3,312
  -3,495
  -3,687
  -3,891
  -4,105
  -4,332
  -4,570
  -4,821
  -5,086
  -5,364
  -5,657
  -5,966
  -6,290
Change in working capital, $m
  -2,350
  22
  25
  29
  33
  36
  40
  43
  47
  51
  54
  58
  62
  66
  70
  74
  79
  83
  88
  93
  98
  104
  109
  115
  122
  128
  135
  142
  149
  157
  165
Cash from operations, $m
  3,567
  -1,515
  -1,566
  -1,624
  -1,689
  -1,762
  -1,842
  -1,929
  -2,023
  -2,124
  -2,233
  -2,350
  -2,474
  -2,607
  -2,747
  -2,897
  -3,055
  -3,223
  -3,400
  -3,588
  -3,786
  -3,995
  -4,215
  -4,447
  -4,692
  -4,949
  -5,221
  -5,506
  -5,807
  -6,123
  -6,455
Maintenance CAPEX, $m
  0
  -1,945
  -1,984
  -2,030
  -2,082
  -2,140
  -2,205
  -2,276
  -2,354
  -2,438
  -2,528
  -2,625
  -2,729
  -2,840
  -2,958
  -3,083
  -3,216
  -3,357
  -3,506
  -3,664
  -3,831
  -4,007
  -4,193
  -4,388
  -4,595
  -4,812
  -5,041
  -5,283
  -5,537
  -5,804
  -6,085
New CAPEX, $m
  -1,521
  -393
  -461
  -527
  -591
  -655
  -719
  -783
  -848
  -913
  -980
  -1,048
  -1,119
  -1,191
  -1,266
  -1,343
  -1,424
  -1,507
  -1,594
  -1,684
  -1,778
  -1,876
  -1,978
  -2,085
  -2,197
  -2,314
  -2,436
  -2,564
  -2,698
  -2,839
  -2,986
Cash from investing activities, $m
  -557
  -2,338
  -2,445
  -2,557
  -2,673
  -2,795
  -2,924
  -3,059
  -3,202
  -3,351
  -3,508
  -3,673
  -3,848
  -4,031
  -4,224
  -4,426
  -4,640
  -4,864
  -5,100
  -5,348
  -5,609
  -5,883
  -6,171
  -6,473
  -6,792
  -7,126
  -7,477
  -7,847
  -8,235
  -8,643
  -9,071
Free cash flow, $m
  3,010
  -3,854
  -4,011
  -4,180
  -4,363
  -4,558
  -4,766
  -4,988
  -5,224
  -5,475
  -5,741
  -6,024
  -6,322
  -6,638
  -6,971
  -7,323
  -7,695
  -8,087
  -8,500
  -8,936
  -9,394
  -9,877
  -10,386
  -10,921
  -11,484
  -12,076
  -12,698
  -13,353
  -14,042
  -14,765
  -15,526
Issuance/(repayment) of debt, $m
  -2,779
  463
  545
  623
  699
  775
  850
  925
  1,002
  1,079
  1,158
  1,239
  1,322
  1,408
  1,496
  1,588
  1,682
  1,781
  1,883
  1,990
  2,101
  2,217
  2,338
  2,464
  2,597
  2,735
  2,879
  3,031
  3,189
  3,355
  3,529
Issuance/(repurchase) of shares, $m
  0
  3,829
  3,936
  4,068
  4,214
  4,373
  4,545
  4,731
  4,931
  5,145
  5,374
  5,432
  5,691
  5,965
  6,257
  6,565
  6,892
  7,236
  7,601
  7,985
  8,391
  8,818
  9,269
  9,744
  10,243
  10,770
  11,323
  11,906
  12,519
  13,163
  13,841
Cash from financing (excl. dividends), $m  
  -2,987
  4,292
  4,481
  4,691
  4,913
  5,148
  5,395
  5,656
  5,933
  6,224
  6,532
  6,671
  7,013
  7,373
  7,753
  8,153
  8,574
  9,017
  9,484
  9,975
  10,492
  11,035
  11,607
  12,208
  12,840
  13,505
  14,202
  14,937
  15,708
  16,518
  17,370
Total cash flow (excl. dividends), $m
  27
  438
  470
  510
  550
  590
  629
  669
  709
  749
  790
  647
  691
  735
  782
  829
  879
  930
  984
  1,040
  1,098
  1,158
  1,221
  1,287
  1,356
  1,429
  1,504
  1,583
  1,666
  1,753
  1,844
Retained Cash Flow (-), $m
  -1,023
  -3,829
  -3,936
  -4,068
  -4,214
  -4,373
  -4,545
  -4,731
  -4,931
  -5,145
  -5,374
  -5,432
  -5,691
  -5,965
  -6,257
  -6,565
  -6,892
  -7,236
  -7,601
  -7,985
  -8,391
  -8,818
  -9,269
  -9,744
  -10,243
  -10,770
  -11,323
  -11,906
  -12,519
  -13,163
  -13,841
Prev. year cash balance distribution, $m
 
  3,035
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  -355
  -3,466
  -3,558
  -3,664
  -3,783
  -3,916
  -4,063
  -4,223
  -4,396
  -4,583
  -4,784
  -5,000
  -5,230
  -5,475
  -5,736
  -6,013
  -6,306
  -6,617
  -6,946
  -7,293
  -7,660
  -8,048
  -8,456
  -8,887
  -9,341
  -9,819
  -10,322
  -10,852
  -11,410
  -11,997
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  -341
  -3,173
  -3,096
  -3,017
  -2,932
  -2,842
  -2,745
  -2,639
  -2,525
  -2,403
  -2,272
  -2,134
  -1,989
  -1,838
  -1,684
  -1,528
  -1,372
  -1,219
  -1,069
  -927
  -792
  -668
  -554
  -453
  -363
  -286
  -222
  -168
  -125
  -90
Current shareholders' claim on cash, %
  100
  79.3
  62.8
  49.7
  39.2
  30.9
  24.2
  19.0
  14.9
  11.6
  9.1
  7.1
  5.6
  4.4
  3.4
  2.7
  2.1
  1.6
  1.3
  1.0
  0.8
  0.6
  0.5
  0.4
  0.3
  0.2
  0.2
  0.1
  0.1
  0.1
  0.1

Barrick Gold Corporation (Barrick) is a gold mining company. The Company is principally engaged in the production and sale of gold and copper, as well as related activities, such as exploration and mine development. The Company's segments include Goldstrike, Cortez, Pueblo Viejo, Lagunas Norte, Veladero, Turquoise Ridge, Acacia Mining plc (Acacia), Pascua-Lama and Other Mines. Goldstrike, Cortez, Pueblo Viejo, Lagunas Norte, Veladero and Turquoise Ridge are its individual gold mines. The Company, through its subsidiary, Acacia, owns gold mines and exploration properties in Africa. It also holds interest in gold mines, including Porgera and Kalgoorlie, and copper mines, such as Zaldivar and Lumwana. The Pascua-Lama project is located on the border between Chile and Argentina. The Company has nine producing gold mines, which are located in Canada, the United States, Peru, Argentina, Australia and the Dominican Republic.

FINANCIAL RATIOS  of  Barrick Gold Corporation (ABX)

Valuation Ratios
P/E Ratio 23.1
Price to Sales 1.8
Price to Book 1.9
Price to Tangible Book
Price to Cash Flow 5.7
Price to Free Cash Flow 10
Growth Rates
Sales Growth Rate -5.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -34.3%
Cap. Spend. - 3 Yr. Gr. Rate -27.2%
Financial Strength
Quick Ratio 17
Current Ratio 0
LT Debt to Equity 98.1%
Total Debt to Equity 99.9%
Interest Coverage 4
Management Effectiveness
Return On Assets 3.5%
Ret/ On Assets - 3 Yr. Avg. -3.2%
Return On Total Capital 4%
Ret/ On T. Cap. - 3 Yr. Avg. -7.2%
Return On Equity 8.7%
Return On Equity - 3 Yr. Avg. -16.1%
Asset Turnover 0.3
Profitability Ratios
Gross Margin 40.7%
Gross Margin - 3 Yr. Avg. 34.8%
EBITDA Margin 45.2%
EBITDA Margin - 3 Yr. Avg. 11.5%
Operating Margin 28.3%
Oper. Margin - 3 Yr. Avg. -5.3%
Pre-Tax Margin 20.8%
Pre-Tax Margin - 3 Yr. Avg. -13.3%
Net Profit Margin 7.7%
Net Profit Margin - 3 Yr. Avg. -17.4%
Effective Tax Rate 51.6%
Eff/ Tax Rate - 3 Yr. Avg. 13.7%
Payout Ratio 13.1%

ABX stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ABX stock intrinsic value calculation we used $11563 million for the last fiscal year's total revenue generated by Barrick Gold Corporation. The default revenue input number comes from 2016 income statement of Barrick Gold Corporation. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our ABX stock valuation model: a) initial revenue growth rate of 2% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for ABX is calculated based on our internal credit rating of Barrick Gold Corporation, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Barrick Gold Corporation.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of ABX stock the variable cost ratio is equal to 126%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for ABX stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 5.7% for Barrick Gold Corporation.

Corporate tax rate of 27% is the nominal tax rate for Barrick Gold Corporation. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the ABX stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for ABX are equal to 169.9%.

Life of production assets of 10.1 years is the average useful life of capital assets used in Barrick Gold Corporation operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for ABX is equal to 9.4%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $10721 million for Barrick Gold Corporation - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 1166.02 million for Barrick Gold Corporation is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Barrick Gold Corporation at the current share price and the inputted number of shares is $20.5 billion.

RELATED COMPANIES Price Int.Val. Rating
K Kinross Gold C 4.99 1.08  str.sell
G Goldcorp Inc. 15.46 5.23  str.sell
ELD Eldorado Gold 1.51 1.49  hold
AEM Agnico Eagle M 54.21 5.52  str.sell
IMG IAMGOLD Corpor 6.51 1.62  str.sell
Financial statements of ABX
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

FREE DOWNLOAD
Follow us on:   twitter   twitter   twitter   twitter

VALUATION THEORY       ASSET ALLOCATION

About X-FIN       Site news       Privacy policy       Terms of use       FAQ

Copyright © X-FIN.com 2005-2017. All rigths reserved.