Intrinsic value of Barrick Gold Corporation - ABX

Previous Close

$20.22

  Intrinsic Value

$1.90

stock screener

  Rating & Target

str. sell

-91%

Previous close

$20.22

 
Intrinsic value

$1.90

 
Up/down potential

-91%

 
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 23.6

 

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
  7.40
  7.16
  6.94
  6.75
  6.57
  6.42
  6.28
  6.15
  6.03
  5.93
  5.84
  5.75
  5.68
  5.61
  5.55
  5.49
  5.44
  5.40
  5.36
  5.32
  5.29
  5.26
  5.24
  5.21
  5.19
  5.17
  5.16
  5.14
  5.13
  5.11
Revenue, $m
  11,563
  12,419
  13,308
  14,232
  15,193
  16,191
  17,230
  18,312
  19,437
  20,610
  21,832
  23,107
  24,436
  25,823
  27,272
  28,785
  30,367
  32,020
  33,750
  35,559
  37,452
  39,434
  41,509
  43,683
  45,960
  48,346
  50,846
  53,467
  56,215
  59,097
  62,118
Variable operating expenses, $m
 
  15,634
  16,740
  17,889
  19,084
  20,327
  21,620
  22,965
  24,365
  25,824
  27,344
  28,744
  30,398
  32,124
  33,926
  35,809
  37,776
  39,833
  41,984
  44,234
  46,589
  49,055
  51,636
  54,340
  57,173
  60,141
  63,252
  66,512
  69,931
  73,515
  77,274
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
  15,634
  16,740
  17,889
  19,084
  20,327
  21,620
  22,965
  24,365
  25,824
  27,344
  28,744
  30,398
  32,124
  33,926
  35,809
  37,776
  39,833
  41,984
  44,234
  46,589
  49,055
  51,636
  54,340
  57,173
  60,141
  63,252
  66,512
  69,931
  73,515
  77,274
Operating income, $m
  3,275
  -3,215
  -3,432
  -3,658
  -3,892
  -4,136
  -4,389
  -4,653
  -4,928
  -5,214
  -5,512
  -5,638
  -5,962
  -6,300
  -6,654
  -7,023
  -7,409
  -7,812
  -8,234
  -8,676
  -9,138
  -9,621
  -10,127
  -10,658
  -11,213
  -11,796
  -12,406
  -13,045
  -13,716
  -14,419
  -15,156
EBITDA, $m
  5,402
  -941
  -1,008
  -1,078
  -1,151
  -1,227
  -1,305
  -1,387
  -1,473
  -1,562
  -1,654
  -1,751
  -1,851
  -1,957
  -2,066
  -2,181
  -2,301
  -2,426
  -2,557
  -2,694
  -2,838
  -2,988
  -3,145
  -3,310
  -3,482
  -3,663
  -3,852
  -4,051
  -4,259
  -4,477
  -4,706
Interest expense (income), $m
  693
  600
  698
  799
  905
  1,015
  1,129
  1,248
  1,372
  1,501
  1,635
  1,775
  1,921
  2,073
  2,232
  2,398
  2,571
  2,752
  2,941
  3,139
  3,346
  3,563
  3,790
  4,027
  4,276
  4,537
  4,810
  5,096
  5,396
  5,710
  6,040
Earnings before tax, $m
  2,402
  -3,815
  -4,130
  -4,457
  -4,797
  -5,151
  -5,519
  -5,901
  -6,300
  -6,715
  -7,147
  -7,413
  -7,883
  -8,374
  -8,886
  -9,421
  -9,980
  -10,564
  -11,176
  -11,815
  -12,484
  -13,184
  -13,917
  -14,685
  -15,489
  -16,332
  -17,215
  -18,141
  -19,112
  -20,129
  -21,196
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
  -3,815
  -4,130
  -4,457
  -4,797
  -5,151
  -5,519
  -5,901
  -6,300
  -6,715
  -7,147
  -7,413
  -7,883
  -8,374
  -8,886
  -9,421
  -9,980
  -10,564
  -11,176
  -11,815
  -12,484
  -13,184
  -13,917
  -14,685
  -15,489
  -16,332
  -17,215
  -18,141
  -19,112
  -20,129
  -21,196

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
  33,205
  35,582
  38,053
  40,622
  43,292
  46,071
  48,962
  51,972
  55,107
  58,375
  61,782
  65,337
  69,047
  72,920
  76,967
  81,195
  85,616
  90,240
  95,077
  100,139
  105,438
  110,987
  116,798
  122,887
  129,266
  135,952
  142,961
  150,308
  158,012
  166,092
Adjusted assets (=assets-cash), $m
  30,906
  33,205
  35,582
  38,053
  40,622
  43,292
  46,071
  48,962
  51,972
  55,107
  58,375
  61,782
  65,337
  69,047
  72,920
  76,967
  81,195
  85,616
  90,240
  95,077
  100,139
  105,438
  110,987
  116,798
  122,887
  129,266
  135,952
  142,961
  150,308
  158,012
  166,092
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
  21,099
  22,610
  24,180
  25,812
  27,509
  29,274
  31,112
  33,024
  35,017
  37,093
  39,258
  41,517
  43,874
  46,335
  48,907
  51,594
  54,403
  57,341
  60,414
  63,631
  66,998
  70,524
  74,217
  78,085
  82,139
  86,388
  90,841
  95,510
  100,405
  105,539
Working capital, $m
  4,127
  1,167
  1,251
  1,338
  1,428
  1,522
  1,620
  1,721
  1,827
  1,937
  2,052
  2,172
  2,297
  2,427
  2,564
  2,706
  2,854
  3,010
  3,172
  3,343
  3,520
  3,707
  3,902
  4,106
  4,320
  4,544
  4,780
  5,026
  5,284
  5,555
  5,839
Total debt, $m
  10,715
  12,239
  14,024
  15,880
  17,809
  19,815
  21,901
  24,072
  26,333
  28,688
  31,142
  33,701
  36,370
  39,156
  42,065
  45,104
  48,280
  51,600
  55,072
  58,704
  62,506
  66,486
  70,653
  75,017
  79,590
  84,381
  89,402
  94,665
  100,183
  105,969
  112,037
Total liabilities, $m
  23,413
  24,937
  26,722
  28,578
  30,507
  32,513
  34,599
  36,770
  39,031
  41,386
  43,840
  46,399
  49,068
  51,854
  54,763
  57,802
  60,978
  64,298
  67,770
  71,402
  75,204
  79,184
  83,351
  87,715
  92,288
  97,079
  102,100
  107,363
  112,881
  118,667
  124,735
Total equity, $m
  10,721
  8,268
  8,860
  9,475
  10,115
  10,780
  11,472
  12,191
  12,941
  13,722
  14,535
  15,384
  16,269
  17,193
  18,157
  19,165
  20,218
  21,318
  22,470
  23,674
  24,935
  26,254
  27,636
  29,083
  30,599
  32,187
  33,852
  35,597
  37,427
  39,345
  41,357
Total liabilities and equity, $m
  34,134
  33,205
  35,582
  38,053
  40,622
  43,293
  46,071
  48,961
  51,972
  55,108
  58,375
  61,783
  65,337
  69,047
  72,920
  76,967
  81,196
  85,616
  90,240
  95,076
  100,139
  105,438
  110,987
  116,798
  122,887
  129,266
  135,952
  142,960
  150,308
  158,012
  166,092
Debt-to-equity ratio
  0.999
  1.480
  1.580
  1.680
  1.760
  1.840
  1.910
  1.970
  2.030
  2.090
  2.140
  2.190
  2.240
  2.280
  2.320
  2.350
  2.390
  2.420
  2.450
  2.480
  2.510
  2.530
  2.560
  2.580
  2.600
  2.620
  2.640
  2.660
  2.680
  2.690
  2.710
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
  -3,815
  -4,130
  -4,457
  -4,797
  -5,151
  -5,519
  -5,901
  -6,300
  -6,715
  -7,147
  -7,413
  -7,883
  -8,374
  -8,886
  -9,421
  -9,980
  -10,564
  -11,176
  -11,815
  -12,484
  -13,184
  -13,917
  -14,685
  -15,489
  -16,332
  -17,215
  -18,141
  -19,112
  -20,129
  -21,196
Depreciation, amort., depletion, $m
  2,127
  2,274
  2,424
  2,579
  2,741
  2,909
  3,084
  3,266
  3,455
  3,652
  3,858
  3,887
  4,111
  4,344
  4,588
  4,842
  5,108
  5,386
  5,677
  5,982
  6,300
  6,633
  6,983
  7,348
  7,731
  8,133
  8,553
  8,994
  9,456
  9,941
  10,449
Funds from operations, $m
  1,217
  -1,541
  -1,706
  -1,878
  -2,056
  -2,242
  -2,435
  -2,636
  -2,845
  -3,063
  -3,289
  -3,526
  -3,772
  -4,030
  -4,298
  -4,579
  -4,872
  -5,178
  -5,498
  -5,833
  -6,184
  -6,551
  -6,935
  -7,337
  -7,758
  -8,200
  -8,662
  -9,147
  -9,655
  -10,188
  -10,747
Change in working capital, $m
  -2,350
  80
  84
  87
  90
  94
  98
  102
  106
  110
  115
  120
  125
  130
  136
  142
  149
  155
  163
  170
  178
  186
  195
  204
  214
  224
  235
  246
  258
  271
  284
Cash from operations, $m
  3,567
  -1,621
  -1,789
  -1,965
  -2,147
  -2,336
  -2,533
  -2,737
  -2,951
  -3,173
  -3,404
  -3,646
  -3,897
  -4,160
  -4,434
  -4,721
  -5,020
  -5,333
  -5,661
  -6,003
  -6,362
  -6,737
  -7,130
  -7,541
  -7,972
  -8,424
  -8,897
  -9,393
  -9,913
  -10,459
  -11,031
Maintenance CAPEX, $m
  0
  -1,945
  -2,089
  -2,239
  -2,394
  -2,556
  -2,724
  -2,898
  -3,080
  -3,270
  -3,467
  -3,673
  -3,887
  -4,111
  -4,344
  -4,588
  -4,842
  -5,108
  -5,386
  -5,677
  -5,982
  -6,300
  -6,633
  -6,983
  -7,348
  -7,731
  -8,133
  -8,553
  -8,994
  -9,456
  -9,941
New CAPEX, $m
  -1,521
  -1,454
  -1,511
  -1,570
  -1,632
  -1,697
  -1,765
  -1,837
  -1,913
  -1,992
  -2,076
  -2,165
  -2,259
  -2,357
  -2,461
  -2,571
  -2,687
  -2,809
  -2,938
  -3,074
  -3,217
  -3,367
  -3,526
  -3,693
  -3,869
  -4,054
  -4,248
  -4,453
  -4,669
  -4,895
  -5,134
Cash from investing activities, $m
  -557
  -3,399
  -3,600
  -3,809
  -4,026
  -4,253
  -4,489
  -4,735
  -4,993
  -5,262
  -5,543
  -5,838
  -6,146
  -6,468
  -6,805
  -7,159
  -7,529
  -7,917
  -8,324
  -8,751
  -9,199
  -9,667
  -10,159
  -10,676
  -11,217
  -11,785
  -12,381
  -13,006
  -13,663
  -14,351
  -15,075
Free cash flow, $m
  3,010
  -5,020
  -5,389
  -5,773
  -6,173
  -6,588
  -7,022
  -7,473
  -7,944
  -8,435
  -8,948
  -9,483
  -10,043
  -10,628
  -11,240
  -11,880
  -12,550
  -13,251
  -13,985
  -14,754
  -15,560
  -16,404
  -17,289
  -18,217
  -19,189
  -20,209
  -21,278
  -22,400
  -23,576
  -24,811
  -26,106
Issuance/(repayment) of debt, $m
  -2,779
  1,717
  1,785
  1,856
  1,929
  2,006
  2,086
  2,171
  2,261
  2,355
  2,454
  2,559
  2,669
  2,786
  2,909
  3,039
  3,176
  3,320
  3,472
  3,633
  3,802
  3,980
  4,167
  4,365
  4,572
  4,791
  5,021
  5,263
  5,518
  5,786
  6,068
Issuance/(repurchase) of shares, $m
  0
  4,397
  4,722
  5,072
  5,437
  5,816
  6,210
  6,621
  7,049
  7,495
  7,961
  8,261
  8,768
  9,297
  9,850
  10,428
  11,033
  11,665
  12,327
  13,019
  13,744
  14,504
  15,299
  16,132
  17,005
  17,921
  18,880
  19,886
  20,941
  22,047
  23,208
Cash from financing (excl. dividends), $m  
  -2,987
  6,114
  6,507
  6,928
  7,366
  7,822
  8,296
  8,792
  9,310
  9,850
  10,415
  10,820
  11,437
  12,083
  12,759
  13,467
  14,209
  14,985
  15,799
  16,652
  17,546
  18,484
  19,466
  20,497
  21,577
  22,712
  23,901
  25,149
  26,459
  27,833
  29,276
Total cash flow (excl. dividends), $m
  27
  1,093
  1,118
  1,155
  1,193
  1,233
  1,275
  1,319
  1,366
  1,415
  1,467
  1,337
  1,395
  1,455
  1,520
  1,588
  1,659
  1,734
  1,814
  1,898
  1,986
  2,079
  2,177
  2,280
  2,389
  2,503
  2,623
  2,750
  2,883
  3,023
  3,170
Retained Cash Flow (-), $m
  -1,023
  -4,397
  -4,722
  -5,072
  -5,437
  -5,816
  -6,210
  -6,621
  -7,049
  -7,495
  -7,961
  -8,261
  -8,768
  -9,297
  -9,850
  -10,428
  -11,033
  -11,665
  -12,327
  -13,019
  -13,744
  -14,504
  -15,299
  -16,132
  -17,005
  -17,921
  -18,880
  -19,886
  -20,941
  -22,047
  -23,208
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
 
  -269
  -3,604
  -3,918
  -4,244
  -4,583
  -4,935
  -5,302
  -5,683
  -6,080
  -6,494
  -6,924
  -7,373
  -7,842
  -8,331
  -8,841
  -9,374
  -9,931
  -10,513
  -11,122
  -11,758
  -12,424
  -13,122
  -13,852
  -14,617
  -15,418
  -16,257
  -17,137
  -18,058
  -19,025
  -20,038
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
 
  -257
  -3,299
  -3,409
  -3,494
  -3,552
  -3,582
  -3,582
  -3,552
  -3,493
  -3,404
  -3,288
  -3,147
  -2,982
  -2,797
  -2,596
  -2,382
  -2,161
  -1,936
  -1,712
  -1,494
  -1,285
  -1,089
  -908
  -744
  -600
  -474
  -368
  -279
  -208
  -151
Current shareholders' claim on cash, %
  100
  79.4
  63.0
  50.0
  39.6
  31.4
  24.9
  19.7
  15.6
  12.4
  9.8
  7.8
  6.2
  4.9
  3.9
  3.1
  2.4
  1.9
  1.5
  1.2
  1.0
  0.8
  0.6
  0.5
  0.4
  0.3
  0.2
  0.2
  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 26.6
Price to Sales 2
Price to Book 2.2
Price to Tangible Book
Price to Cash Flow 6.6
Price to Free Cash Flow 11.5
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 7.4% 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 1165.89 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 $23.6 billion.

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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.

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