Intrinsic value of Detour Gold Corporation - DGC

Previous Close

$12.58

  Intrinsic Value

$3.62

stock screener

  Rating & Target

str. sell

-71%

Previous close

$12.58

 
Intrinsic value

$3.62

 
Up/down potential

-71%

 
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 2.2

 

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
  8.30
  7.97
  7.67
  7.41
  7.17
  6.95
  6.75
  6.58
  6.42
  6.28
  6.15
  6.04
  5.93
  5.84
  5.75
  5.68
  5.61
  5.55
  5.50
  5.45
  5.40
  5.36
  5.32
  5.29
  5.26
  5.24
  5.21
  5.19
  5.17
  5.16
Revenue, $m
  889
  963
  1,040
  1,119
  1,202
  1,288
  1,378
  1,471
  1,568
  1,668
  1,773
  1,882
  1,996
  2,114
  2,238
  2,366
  2,501
  2,641
  2,788
  2,941
  3,101
  3,268
  3,444
  3,627
  3,819
  4,020
  4,230
  4,451
  4,682
  4,924
  5,178
Variable operating expenses, $m
 
  199
  215
  232
  249
  267
  285
  304
  325
  345
  367
  390
  413
  438
  463
  490
  518
  547
  577
  609
  642
  677
  713
  751
  791
  832
  876
  921
  969
  1,019
  1,072
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
  894
  928
  962
  998
  1,034
  1,072
  1,112
  1,152
  1,194
  1,238
  1,282
  1,329
  1,376
  1,426
  1,477
  1,530
  1,585
  1,642
  1,701
  1,762
  1,825
  1,891
  1,959
  2,030
  2,104
  2,179
  2,259
  2,341
  2,427
Operating income, $m
  76
  101
  146
  192
  240
  291
  343
  399
  456
  516
  579
  645
  714
  786
  862
  941
  1,024
  1,111
  1,203
  1,299
  1,400
  1,507
  1,619
  1,736
  1,860
  1,990
  2,127
  2,271
  2,423
  2,583
  2,751
EBITDA, $m
  300
  344
  407
  474
  543
  615
  690
  769
  851
  936
  1,025
  1,119
  1,216
  1,318
  1,425
  1,536
  1,654
  1,776
  1,905
  2,040
  2,181
  2,330
  2,485
  2,649
  2,821
  3,002
  3,192
  3,392
  3,602
  3,823
  4,055
Interest expense (income), $m
  34
  18
  20
  23
  26
  29
  33
  36
  40
  43
  47
  51
  55
  59
  64
  68
  73
  78
  84
  89
  95
  101
  107
  114
  121
  128
  136
  144
  152
  161
  170
Earnings before tax, $m
  -33
  84
  125
  169
  214
  261
  311
  362
  416
  473
  532
  594
  659
  727
  798
  872
  951
  1,033
  1,119
  1,210
  1,305
  1,406
  1,511
  1,622
  1,739
  1,862
  1,991
  2,128
  2,271
  2,422
  2,581
Tax expense, $m
  -24
  23
  34
  46
  58
  71
  84
  98
  112
  128
  144
  160
  178
  196
  215
  236
  257
  279
  302
  327
  352
  380
  408
  438
  470
  503
  538
  574
  613
  654
  697
Net income, $m
  -9
  61
  91
  123
  156
  191
  227
  265
  304
  345
  388
  434
  481
  530
  582
  637
  694
  754
  817
  883
  953
  1,026
  1,103
  1,184
  1,270
  1,359
  1,454
  1,553
  1,658
  1,768
  1,884

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
  3,275
  3,536
  3,807
  4,089
  4,382
  4,687
  5,003
  5,332
  5,674
  6,031
  6,402
  6,788
  7,191
  7,611
  8,049
  8,506
  8,983
  9,482
  10,003
  10,547
  11,117
  11,713
  12,337
  12,990
  13,673
  14,389
  15,140
  15,926
  16,749
  17,613
Adjusted assets (=assets-cash), $m
  3,027
  3,275
  3,536
  3,807
  4,089
  4,382
  4,687
  5,003
  5,332
  5,674
  6,031
  6,402
  6,788
  7,191
  7,611
  8,049
  8,506
  8,983
  9,482
  10,003
  10,547
  11,117
  11,713
  12,337
  12,990
  13,673
  14,389
  15,140
  15,926
  16,749
  17,613
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
  3,102
  3,349
  3,606
  3,873
  4,151
  4,439
  4,739
  5,051
  5,375
  5,713
  6,064
  6,430
  6,812
  7,209
  7,624
  8,057
  8,509
  8,982
  9,475
  9,991
  10,531
  11,095
  11,686
  12,305
  12,952
  13,631
  14,341
  15,086
  15,866
  16,684
Working capital, $m
  -214
  60
  64
  69
  75
  80
  85
  91
  97
  103
  110
  117
  124
  131
  139
  147
  155
  164
  173
  182
  192
  203
  214
  225
  237
  249
  262
  276
  290
  305
  321
Total debt, $m
  444
  309
  353
  399
  446
  495
  546
  600
  655
  712
  772
  834
  899
  967
  1,038
  1,111
  1,188
  1,268
  1,352
  1,439
  1,531
  1,627
  1,727
  1,832
  1,941
  2,056
  2,176
  2,302
  2,434
  2,573
  2,718
Total liabilities, $m
  685
  550
  594
  640
  687
  736
  787
  841
  896
  953
  1,013
  1,075
  1,140
  1,208
  1,279
  1,352
  1,429
  1,509
  1,593
  1,680
  1,772
  1,868
  1,968
  2,073
  2,182
  2,297
  2,417
  2,543
  2,675
  2,814
  2,959
Total equity, $m
  2,517
  2,725
  2,942
  3,167
  3,402
  3,646
  3,899
  4,163
  4,436
  4,721
  5,018
  5,326
  5,648
  5,983
  6,332
  6,696
  7,077
  7,474
  7,889
  8,322
  8,775
  9,249
  9,745
  10,264
  10,807
  11,376
  11,972
  12,596
  13,250
  13,935
  14,654
Total liabilities and equity, $m
  3,202
  3,275
  3,536
  3,807
  4,089
  4,382
  4,686
  5,004
  5,332
  5,674
  6,031
  6,401
  6,788
  7,191
  7,611
  8,048
  8,506
  8,983
  9,482
  10,002
  10,547
  11,117
  11,713
  12,337
  12,989
  13,673
  14,389
  15,139
  15,925
  16,749
  17,613
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
  61
  91
  123
  156
  191
  227
  265
  304
  345
  388
  434
  481
  530
  582
  637
  694
  754
  817
  883
  953
  1,026
  1,103
  1,184
  1,270
  1,359
  1,454
  1,553
  1,658
  1,768
  1,884
Depreciation, amort., depletion, $m
  224
  242
  262
  282
  303
  324
  347
  370
  395
  420
  446
  474
  502
  532
  563
  596
  629
  665
  702
  740
  781
  823
  867
  913
  961
  1,012
  1,065
  1,120
  1,179
  1,240
  1,303
Funds from operations, $m
  241
  303
  353
  405
  459
  515
  574
  635
  699
  765
  835
  907
  983
  1,063
  1,146
  1,232
  1,323
  1,419
  1,519
  1,624
  1,734
  1,849
  1,970
  2,097
  2,231
  2,371
  2,519
  2,674
  2,837
  3,008
  3,188
Change in working capital, $m
  -25
  5
  5
  5
  5
  5
  6
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  12
  13
  14
  14
  15
  16
Cash from operations, $m
  266
  299
  348
  400
  454
  510
  568
  629
  693
  759
  828
  901
  976
  1,055
  1,138
  1,224
  1,315
  1,410
  1,510
  1,614
  1,724
  1,839
  1,959
  2,086
  2,219
  2,359
  2,506
  2,660
  2,822
  2,993
  3,172
Maintenance CAPEX, $m
  0
  -224
  -242
  -262
  -282
  -303
  -324
  -347
  -370
  -395
  -420
  -446
  -474
  -502
  -532
  -563
  -596
  -629
  -665
  -702
  -740
  -781
  -823
  -867
  -913
  -961
  -1,012
  -1,065
  -1,120
  -1,179
  -1,240
New CAPEX, $m
  -141
  -238
  -247
  -257
  -267
  -278
  -288
  -300
  -312
  -324
  -337
  -351
  -366
  -381
  -398
  -415
  -433
  -452
  -472
  -494
  -516
  -540
  -565
  -591
  -618
  -648
  -678
  -711
  -745
  -780
  -818
Cash from investing activities, $m
  -140
  -462
  -489
  -519
  -549
  -581
  -612
  -647
  -682
  -719
  -757
  -797
  -840
  -883
  -930
  -978
  -1,029
  -1,081
  -1,137
  -1,196
  -1,256
  -1,321
  -1,388
  -1,458
  -1,531
  -1,609
  -1,690
  -1,776
  -1,865
  -1,959
  -2,058
Free cash flow, $m
  126
  -163
  -141
  -119
  -95
  -70
  -45
  -18
  11
  40
  71
  103
  136
  171
  208
  246
  287
  329
  373
  419
  467
  518
  572
  628
  687
  750
  815
  884
  957
  1,034
  1,115
Issuance/(repayment) of debt, $m
  -197
  40
  44
  46
  47
  49
  51
  53
  55
  58
  60
  62
  65
  68
  71
  74
  77
  80
  84
  88
  92
  96
  100
  105
  110
  115
  120
  126
  132
  138
  145
Issuance/(repurchase) of shares, $m
  64
  147
  126
  103
  78
  53
  26
  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 from financing (excl. dividends), $m  
  -168
  187
  170
  149
  125
  102
  77
  53
  55
  58
  60
  62
  65
  68
  71
  74
  77
  80
  84
  88
  92
  96
  100
  105
  110
  115
  120
  126
  132
  138
  145
Total cash flow (excl. dividends), $m
  -42
  24
  28
  29
  31
  32
  33
  36
  66
  98
  131
  165
  201
  239
  279
  320
  363
  409
  456
  506
  559
  614
  672
  733
  797
  865
  936
  1,011
  1,089
  1,172
  1,260
Retained Cash Flow (-), $m
  -59
  -208
  -217
  -226
  -235
  -244
  -253
  -263
  -274
  -285
  -296
  -309
  -321
  -335
  -349
  -364
  -380
  -397
  -415
  -434
  -453
  -474
  -496
  -519
  -543
  -569
  -596
  -624
  -654
  -685
  -718
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
 
  -184
  -189
  -196
  -204
  -212
  -220
  -228
  -208
  -187
  -166
  -143
  -120
  -96
  -71
  -44
  -17
  12
  42
  73
  106
  140
  176
  214
  254
  296
  340
  386
  435
  487
  541
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
 
  -176
  -173
  -171
  -168
  -164
  -160
  -154
  -130
  -108
  -87
  -68
  -51
  -36
  -24
  -13
  -4
  3
  8
  11
  13
  14
  15
  14
  13
  12
  10
  8
  7
  5
  4
Current shareholders' claim on cash, %
  100
  93.7
  89.0
  85.6
  83.2
  81.7
  81.1
  81.1
  81.1
  81.1
  81.1
  81.1
  81.1
  81.1
  81.1
  81.1
  81.1
  81.1
  81.1
  81.1
  81.1
  81.1
  81.1
  81.1
  81.1
  81.1
  81.1
  81.1
  81.1
  81.1
  81.1

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 -244
Price to Sales 2.5
Price to Book 0.9
Price to Tangible Book
Price to Cash Flow 8.3
Price to Free Cash Flow 17.6
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 8.3% 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 173.946 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 $2.2 billion.

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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.

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