Intrinsic value of Detour Gold Corporation - DGC

Previous Close

$13.65

  Intrinsic Value

$3.62

stock screener

  Rating & Target

str. sell

-74%

Previous close

$13.65

 
Intrinsic value

$3.62

 
Up/down potential

-74%

 
Rating

str. sell

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

We calculate the intrinsic value of DGC 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 2.4

 

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, %
  16.82
  8.00
  7.70
  7.43
  7.19
  6.97
  6.77
  6.59
  6.43
  6.29
  6.16
  6.05
  5.94
  5.85
  5.76
  5.69
  5.62
  5.56
  5.50
  5.45
  5.41
  5.36
  5.33
  5.30
  5.27
  5.24
  5.22
  5.19
  5.17
  5.16
  5.14
Revenue, $m
  889
  960
  1,034
  1,111
  1,191
  1,274
  1,360
  1,450
  1,543
  1,640
  1,741
  1,846
  1,956
  2,070
  2,190
  2,314
  2,444
  2,580
  2,722
  2,870
  3,025
  3,188
  3,358
  3,535
  3,721
  3,916
  4,121
  4,335
  4,559
  4,794
  5,041
Variable operating expenses, $m
 
  199
  214
  230
  246
  264
  282
  300
  319
  339
  360
  382
  405
  429
  453
  479
  506
  534
  563
  594
  626
  660
  695
  732
  770
  811
  853
  897
  944
  992
  1,043
Fixed operating expenses, $m
 
  662
  679
  696
  713
  731
  749
  768
  787
  807
  827
  848
  869
  891
  913
  936
  959
  983
  1,008
  1,033
  1,059
  1,085
  1,112
  1,140
  1,168
  1,198
  1,228
  1,258
  1,290
  1,322
  1,355
Total operating expenses, $m
  814
  861
  893
  926
  959
  995
  1,031
  1,068
  1,106
  1,146
  1,187
  1,230
  1,274
  1,320
  1,366
  1,415
  1,465
  1,517
  1,571
  1,627
  1,685
  1,745
  1,807
  1,872
  1,938
  2,009
  2,081
  2,155
  2,234
  2,314
  2,398
Operating income, $m
  76
  99
  141
  185
  231
  279
  329
  382
  436
  494
  554
  617
  682
  751
  824
  900
  979
  1,063
  1,151
  1,243
  1,341
  1,443
  1,550
  1,664
  1,783
  1,908
  2,040
  2,179
  2,326
  2,480
  2,642
EBITDA, $m
  300
  341
  402
  465
  531
  600
  672
  747
  825
  907
  992
  1,081
  1,175
  1,272
  1,375
  1,482
  1,594
  1,712
  1,836
  1,966
  2,102
  2,245
  2,396
  2,553
  2,719
  2,894
  3,077
  3,270
  3,473
  3,687
  3,911
Interest expense (income), $m
  34
  18
  20
  23
  26
  29
  32
  35
  39
  42
  46
  50
  54
  58
  62
  67
  71
  76
  81
  87
  92
  98
  104
  111
  117
  124
  132
  140
  148
  156
  165
Earnings before tax, $m
  -33
  81
  121
  162
  205
  250
  297
  346
  398
  451
  508
  567
  629
  693
  761
  833
  908
  987
  1,070
  1,157
  1,248
  1,345
  1,446
  1,553
  1,665
  1,784
  1,908
  2,040
  2,178
  2,324
  2,477
Tax expense, $m
  -24
  22
  33
  44
  55
  68
  80
  93
  107
  122
  137
  153
  170
  187
  206
  225
  245
  266
  289
  312
  337
  363
  390
  419
  450
  482
  515
  551
  588
  627
  669
Net income, $m
  -9
  59
  88
  118
  150
  183
  217
  253
  290
  330
  371
  414
  459
  506
  556
  608
  663
  720
  781
  844
  911
  982
  1,056
  1,134
  1,216
  1,302
  1,393
  1,489
  1,590
  1,696
  1,808

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  175
  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
  3,202
  3,266
  3,517
  3,779
  4,050
  4,332
  4,626
  4,931
  5,248
  5,578
  5,922
  6,280
  6,653
  7,042
  7,448
  7,871
  8,314
  8,775
  9,258
  9,763
  10,290
  10,842
  11,420
  12,025
  12,658
  13,321
  14,016
  14,744
  15,507
  16,307
  17,145
Adjusted assets (=assets-cash), $m
  3,027
  3,266
  3,517
  3,779
  4,050
  4,332
  4,626
  4,931
  5,248
  5,578
  5,922
  6,280
  6,653
  7,042
  7,448
  7,871
  8,314
  8,775
  9,258
  9,763
  10,290
  10,842
  11,420
  12,025
  12,658
  13,321
  14,016
  14,744
  15,507
  16,307
  17,145
Revenue / Adjusted assets
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
Average production assets, $m
  2,864
  3,094
  3,332
  3,579
  3,836
  4,104
  4,382
  4,671
  4,971
  5,284
  5,610
  5,949
  6,302
  6,671
  7,055
  7,456
  7,875
  8,313
  8,770
  9,248
  9,748
  10,271
  10,818
  11,391
  11,991
  12,619
  13,277
  13,967
  14,689
  15,447
  16,241
Working capital, $m
  -214
  60
  64
  69
  74
  79
  84
  90
  96
  102
  108
  114
  121
  128
  136
  143
  152
  160
  169
  178
  188
  198
  208
  219
  231
  243
  255
  269
  283
  297
  313
Total debt, $m
  444
  308
  350
  394
  439
  487
  536
  587
  641
  696
  754
  814
  877
  942
  1,010
  1,081
  1,156
  1,233
  1,314
  1,399
  1,488
  1,581
  1,678
  1,779
  1,886
  1,997
  2,114
  2,236
  2,364
  2,499
  2,639
Total liabilities, $m
  685
  549
  591
  635
  680
  728
  777
  828
  882
  937
  995
  1,055
  1,118
  1,183
  1,251
  1,322
  1,397
  1,474
  1,555
  1,640
  1,729
  1,822
  1,919
  2,020
  2,127
  2,238
  2,355
  2,477
  2,605
  2,740
  2,880
Total equity, $m
  2,517
  2,717
  2,926
  3,144
  3,370
  3,604
  3,849
  4,102
  4,366
  4,641
  4,927
  5,225
  5,535
  5,859
  6,197
  6,549
  6,917
  7,301
  7,703
  8,123
  8,562
  9,021
  9,502
  10,005
  10,532
  11,083
  11,661
  12,267
  12,902
  13,567
  14,265
Total liabilities and equity, $m
  3,202
  3,266
  3,517
  3,779
  4,050
  4,332
  4,626
  4,930
  5,248
  5,578
  5,922
  6,280
  6,653
  7,042
  7,448
  7,871
  8,314
  8,775
  9,258
  9,763
  10,291
  10,843
  11,421
  12,025
  12,659
  13,321
  14,016
  14,744
  15,507
  16,307
  17,145
Debt-to-equity ratio
  0.176
  0.110
  0.120
  0.130
  0.130
  0.140
  0.140
  0.140
  0.150
  0.150
  0.150
  0.160
  0.160
  0.160
  0.160
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.180
  0.180
  0.180
  0.180
  0.180
  0.180
  0.180
  0.180
  0.180
  0.190
Adjusted equity ratio
  0.774
  0.832
  0.832
  0.832
  0.832
  0.832
  0.832
  0.832
  0.832
  0.832
  0.832
  0.832
  0.832
  0.832
  0.832
  0.832
  0.832
  0.832
  0.832
  0.832
  0.832
  0.832
  0.832
  0.832
  0.832
  0.832
  0.832
  0.832
  0.832
  0.832
  0.832

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -9
  59
  88
  118
  150
  183
  217
  253
  290
  330
  371
  414
  459
  506
  556
  608
  663
  720
  781
  844
  911
  982
  1,056
  1,134
  1,216
  1,302
  1,393
  1,489
  1,590
  1,696
  1,808
Depreciation, amort., depletion, $m
  224
  242
  260
  280
  300
  321
  342
  365
  388
  413
  438
  465
  492
  521
  551
  583
  615
  649
  685
  722
  762
  802
  845
  890
  937
  986
  1,037
  1,091
  1,148
  1,207
  1,269
Funds from operations, $m
  241
  301
  349
  398
  450
  503
  559
  618
  679
  742
  809
  878
  951
  1,027
  1,107
  1,191
  1,278
  1,370
  1,466
  1,567
  1,673
  1,784
  1,901
  2,023
  2,152
  2,288
  2,430
  2,580
  2,738
  2,903
  3,077
Change in working capital, $m
  -25
  4
  5
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
  15
  15
Cash from operations, $m
  266
  297
  344
  393
  445
  498
  554
  612
  673
  736
  803
  872
  944
  1,020
  1,100
  1,183
  1,270
  1,361
  1,457
  1,558
  1,663
  1,774
  1,890
  2,012
  2,141
  2,276
  2,418
  2,567
  2,724
  2,889
  3,062
Maintenance CAPEX, $m
  0
  -224
  -242
  -260
  -280
  -300
  -321
  -342
  -365
  -388
  -413
  -438
  -465
  -492
  -521
  -551
  -583
  -615
  -649
  -685
  -722
  -762
  -802
  -845
  -890
  -937
  -986
  -1,037
  -1,091
  -1,148
  -1,207
New CAPEX, $m
  -141
  -230
  -238
  -248
  -257
  -267
  -278
  -289
  -301
  -313
  -326
  -339
  -353
  -369
  -384
  -401
  -419
  -438
  -457
  -478
  -500
  -523
  -547
  -573
  -600
  -628
  -658
  -690
  -723
  -758
  -794
Cash from investing activities, $m
  -140
  -454
  -480
  -508
  -537
  -567
  -599
  -631
  -666
  -701
  -739
  -777
  -818
  -861
  -905
  -952
  -1,002
  -1,053
  -1,106
  -1,163
  -1,222
  -1,285
  -1,349
  -1,418
  -1,490
  -1,565
  -1,644
  -1,727
  -1,814
  -1,906
  -2,001
Free cash flow, $m
  126
  -157
  -136
  -115
  -92
  -69
  -45
  -19
  7
  35
  64
  95
  126
  159
  194
  230
  269
  309
  350
  394
  441
  489
  541
  594
  651
  711
  774
  840
  910
  983
  1,061
Issuance/(repayment) of debt, $m
  -197
  39
  42
  44
  46
  47
  49
  51
  53
  55
  58
  60
  63
  65
  68
  71
  74
  78
  81
  85
  89
  93
  97
  102
  106
  111
  117
  122
  128
  134
  141
Issuance/(repurchase) of shares, $m
  64
  141
  121
  99
  76
  52
  27
  1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  -168
  180
  163
  143
  122
  99
  76
  52
  53
  55
  58
  60
  63
  65
  68
  71
  74
  78
  81
  85
  89
  93
  97
  102
  106
  111
  117
  122
  128
  134
  141
Total cash flow (excl. dividends), $m
  -42
  23
  27
  28
  29
  31
  32
  33
  61
  91
  122
  155
  189
  225
  262
  302
  343
  386
  432
  479
  529
  582
  638
  696
  758
  822
  890
  962
  1,038
  1,118
  1,202
Retained Cash Flow (-), $m
  -59
  -200
  -209
  -217
  -226
  -235
  -244
  -254
  -264
  -275
  -286
  -298
  -310
  -324
  -338
  -352
  -368
  -384
  -402
  -420
  -439
  -459
  -481
  -503
  -527
  -552
  -578
  -606
  -635
  -665
  -698
Prev. year cash balance distribution, $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 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
 
  -177
  -182
  -189
  -196
  -204
  -212
  -221
  -203
  -184
  -164
  -143
  -122
  -99
  -75
  -51
  -25
  2
  30
  59
  90
  123
  157
  193
  231
  270
  312
  357
  403
  452
  504
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
 
  -170
  -167
  -165
  -162
  -158
  -154
  -149
  -127
  -106
  -86
  -68
  -52
  -38
  -25
  -15
  -6
  0
  6
  9
  11
  13
  13
  13
  12
  11
  9
  8
  6
  5
  4
Current shareholders' claim on cash, %
  100
  94.4
  90.2
  87.0
  84.9
  83.5
  82.8
  82.8
  82.8
  82.8
  82.8
  82.8
  82.8
  82.8
  82.8
  82.8
  82.8
  82.8
  82.8
  82.8
  82.8
  82.8
  82.8
  82.8
  82.8
  82.8
  82.8
  82.8
  82.8
  82.8
  82.8

Detour Gold Corporation is a Canada-based intermediate gold producing company. The Company is engaged in the acquisition, exploration, development and operation of mineral property interests. Its primary asset is its Detour Lake mine, which is an open pit operation located in northeastern Ontario, approximately 300 kilometers northeast of Timmins and over 180 kilometers by road northeast of Cochrane. Its Detour Lake property consists of a contiguous block of mining claims and leases totaling approximately 620 square kilometers in the District of Cochrane. The Company's projects also include Detour Lake Exploration Block A and Detour Lake Exploration Regional. The Block A near-surface deposit is located approximately one kilometer northwest of the mine and contains a measured and indicated resource of approximately two million ounces, and has completed over 160,000 meters of drilling. The Company controls approximately 630 square kilometers of the Detour Lake Exploration Regional.

FINANCIAL RATIOS  of  Detour Gold Corporation (DGC)

Valuation Ratios
P/E Ratio -264.8
Price to Sales 2.7
Price to Book 0.9
Price to Tangible Book
Price to Cash Flow 9
Price to Free Cash Flow 19.1
Growth Rates
Sales Growth Rate 16.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 3.7%
Cap. Spend. - 3 Yr. Gr. Rate -23.4%
Financial Strength
Quick Ratio 0
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 17.6%
Interest Coverage 0
Management Effectiveness
Return On Assets 0%
Ret/ On Assets - 3 Yr. Avg. -2.8%
Return On Total Capital -0.3%
Ret/ On T. Cap. - 3 Yr. Avg. -4.6%
Return On Equity -0.4%
Return On Equity - 3 Yr. Avg. -5.8%
Asset Turnover 0.3
Profitability Ratios
Gross Margin 14.4%
Gross Margin - 3 Yr. Avg. 5.2%
EBITDA Margin 25.3%
EBITDA Margin - 3 Yr. Avg. 19.3%
Operating Margin 8.4%
Oper. Margin - 3 Yr. Avg. -0.7%
Pre-Tax Margin -3.7%
Pre-Tax Margin - 3 Yr. Avg. -13.2%
Net Profit Margin -1%
Net Profit Margin - 3 Yr. Avg. -19.3%
Effective Tax Rate 72.7%
Eff/ Tax Rate - 3 Yr. Avg. -19.2%
Payout Ratio 0%

DGC stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the DGC stock intrinsic value calculation we used $889 million for the last fiscal year's total revenue generated by Detour Gold Corporation. The default revenue input number comes from 2016 income statement of Detour 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 DGC stock valuation model: a) initial revenue growth rate of 8% 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 DGC is calculated based on our internal credit rating of Detour 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 Detour 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 DGC stock the variable cost ratio is equal to 20.7%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $646 million in the base year in the intrinsic value calculation for DGC 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 6.6% for Detour Gold Corporation.

Corporate tax rate of 27% is the nominal tax rate for Detour 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 DGC 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 DGC are equal to 322.2%.

Life of production assets of 12.8 years is the average useful life of capital assets used in Detour 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 DGC is equal to 6.2%. 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 - $2517 million for Detour 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 174.047 million for Detour 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 Detour Gold Corporation at the current share price and the inputted number of shares is $2.4 billion.

RELATED COMPANIES Price Int.Val. Rating
IMG IAMGOLD Corpor 7.25 1.62  str.sell
FNV Franco-Nevada 100.58 7.55  str.sell
Financial statements of DGC
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.