Intrinsic value of Franco-Nevada Corporation - FNV

Previous Close

$98.10

  Intrinsic Value

$7.55

stock screener

  Rating & Target

str. sell

-92%

Previous close

$98.10

 
Intrinsic value

$7.55

 
Up/down potential

-92%

 
Rating

str. sell

We calculate the intrinsic value of FNV 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 18.2

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   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, %
  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
  840
  860
  882
  907
  934
  964
  997
  1,033
  1,071
  1,112
  1,156
  1,203
  1,253
  1,306
  1,362
  1,422
  1,485
  1,552
  1,623
  1,697
  1,776
  1,859
  1,947
  2,039
  2,136
  2,238
  2,345
  2,459
  2,578
  2,703
Variable operating expenses, $m
  314
  322
  330
  339
  349
  361
  373
  386
  401
  416
  432
  450
  469
  488
  510
  532
  556
  581
  607
  635
  664
  695
  728
  762
  799
  837
  877
  920
  964
  1,011
Fixed operating expenses, $m
  321
  328
  335
  343
  350
  358
  366
  374
  382
  390
  399
  408
  417
  426
  435
  445
  455
  465
  475
  485
  496
  507
  518
  529
  541
  553
  565
  578
  590
  603
Total operating expenses, $m
  635
  650
  665
  682
  699
  719
  739
  760
  783
  806
  831
  858
  886
  914
  945
  977
  1,011
  1,046
  1,082
  1,120
  1,160
  1,202
  1,246
  1,291
  1,340
  1,390
  1,442
  1,498
  1,554
  1,614
Operating income, $m
  205
  210
  217
  225
  235
  246
  259
  273
  289
  306
  325
  345
  368
  392
  418
  445
  475
  507
  541
  577
  616
  657
  701
  747
  796
  848
  903
  962
  1,023
  1,089
EBITDA, $m
  584
  598
  614
  634
  656
  680
  708
  738
  771
  807
  846
  888
  932
  980
  1,032
  1,086
  1,145
  1,207
  1,272
  1,342
  1,416
  1,495
  1,578
  1,666
  1,758
  1,856
  1,960
  2,070
  2,185
  2,307
Interest expense (income), $m
  4
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
  5
  5
  6
  6
  7
  7
  8
Earnings before tax, $m
  205
  210
  217
  225
  234
  245
  258
  272
  288
  305
  324
  344
  366
  390
  416
  443
  473
  504
  538
  574
  612
  653
  696
  742
  791
  842
  897
  955
  1,016
  1,081
Tax expense, $m
  55
  57
  59
  61
  63
  66
  70
  73
  78
  82
  87
  93
  99
  105
  112
  120
  128
  136
  145
  155
  165
  176
  188
  200
  213
  227
  242
  258
  274
  292
Net income, $m
  150
  153
  158
  164
  171
  179
  188
  199
  210
  223
  236
  251
  267
  285
  303
  324
  345
  368
  393
  419
  447
  477
  508
  542
  577
  615
  655
  697
  742
  789

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $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 assets, $m
  5,458
  5,583
  5,727
  5,888
  6,066
  6,262
  6,475
  6,706
  6,955
  7,222
  7,507
  7,812
  8,137
  8,481
  8,847
  9,235
  9,645
  10,079
  10,538
  11,022
  11,533
  12,072
  12,640
  13,238
  13,868
  14,532
  15,230
  15,965
  16,738
  17,552
Adjusted assets (=assets-cash), $m
  5,458
  5,583
  5,727
  5,888
  6,066
  6,262
  6,475
  6,706
  6,955
  7,222
  7,507
  7,812
  8,137
  8,481
  8,847
  9,235
  9,645
  10,079
  10,538
  11,022
  11,533
  12,072
  12,640
  13,238
  13,868
  14,532
  15,230
  15,965
  16,738
  17,552
Revenue / Adjusted assets
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
Average production assets, $m
  4,772
  4,882
  5,007
  5,148
  5,304
  5,476
  5,662
  5,864
  6,081
  6,315
  6,565
  6,831
  7,115
  7,416
  7,736
  8,075
  8,434
  8,813
  9,214
  9,638
  10,085
  10,556
  11,052
  11,575
  12,127
  12,707
  13,317
  13,960
  14,636
  15,347
Working capital, $m
  97
  99
  101
  104
  107
  111
  115
  119
  123
  128
  133
  138
  144
  150
  157
  164
  171
  179
  187
  195
  204
  214
  224
  234
  246
  257
  270
  283
  296
  311
Total debt, $m
  2
  4
  7
  10
  13
  17
  21
  25
  30
  35
  41
  46
  53
  59
  66
  73
  81
  90
  98
  107
  117
  127
  138
  150
  161
  174
  187
  201
  216
  231
Total liabilities, $m
  104
  106
  109
  112
  115
  119
  123
  127
  132
  137
  143
  148
  155
  161
  168
  175
  183
  192
  200
  209
  219
  229
  240
  252
  263
  276
  289
  303
  318
  333
Total equity, $m
  5,354
  5,477
  5,618
  5,776
  5,951
  6,143
  6,352
  6,579
  6,823
  7,085
  7,365
  7,664
  7,982
  8,320
  8,679
  9,059
  9,462
  9,888
  10,338
  10,813
  11,314
  11,842
  12,400
  12,987
  13,605
  14,256
  14,941
  15,662
  16,420
  17,218
Total liabilities and equity, $m
  5,458
  5,583
  5,727
  5,888
  6,066
  6,262
  6,475
  6,706
  6,955
  7,222
  7,508
  7,812
  8,137
  8,481
  8,847
  9,234
  9,645
  10,080
  10,538
  11,022
  11,533
  12,071
  12,640
  13,239
  13,868
  14,532
  15,230
  15,965
  16,738
  17,551
Debt-to-equity ratio
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.010
  0.010
  0.010
  0.010
  0.010
  0.010
  0.010
  0.010
  0.010
  0.010
  0.010
  0.010
  0.010
  0.010
  0.010
  0.010
  0.010
  0.010
  0.010
  0.010
Adjusted equity ratio
  0.981
  0.981
  0.981
  0.981
  0.981
  0.981
  0.981
  0.981
  0.981
  0.981
  0.981
  0.981
  0.981
  0.981
  0.981
  0.981
  0.981
  0.981
  0.981
  0.981
  0.981
  0.981
  0.981
  0.981
  0.981
  0.981
  0.981
  0.981
  0.981
  0.981

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  150
  153
  158
  164
  171
  179
  188
  199
  210
  223
  236
  251
  267
  285
  303
  324
  345
  368
  393
  419
  447
  477
  508
  542
  577
  615
  655
  697
  742
  789
Depreciation, amort., depletion, $m
  379
  387
  397
  409
  421
  435
  449
  465
  483
  501
  521
  542
  565
  589
  614
  641
  669
  699
  731
  765
  800
  838
  877
  919
  962
  1,008
  1,057
  1,108
  1,162
  1,218
Funds from operations, $m
  529
  541
  556
  573
  592
  614
  638
  664
  693
  724
  757
  793
  832
  873
  917
  964
  1,014
  1,068
  1,124
  1,184
  1,247
  1,314
  1,385
  1,460
  1,540
  1,623
  1,712
  1,805
  1,904
  2,007
Change in working capital, $m
  2
  2
  3
  3
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
  13
  14
  14
Cash from operations, $m
  527
  539
  553
  570
  589
  610
  634
  660
  688
  719
  752
  788
  826
  867
  911
  958
  1,007
  1,060
  1,116
  1,175
  1,238
  1,305
  1,375
  1,450
  1,528
  1,612
  1,699
  1,792
  1,890
  1,993
Maintenance CAPEX, $m
  -371
  -379
  -387
  -397
  -409
  -421
  -435
  -449
  -465
  -483
  -501
  -521
  -542
  -565
  -589
  -614
  -641
  -669
  -699
  -731
  -765
  -800
  -838
  -877
  -919
  -962
  -1,008
  -1,057
  -1,108
  -1,162
New CAPEX, $m
  -93
  -110
  -125
  -141
  -156
  -171
  -186
  -202
  -217
  -233
  -250
  -266
  -284
  -301
  -320
  -339
  -359
  -380
  -401
  -423
  -447
  -471
  -497
  -523
  -551
  -580
  -611
  -643
  -676
  -711
Cash from investing activities, $m
  -464
  -489
  -512
  -538
  -565
  -592
  -621
  -651
  -682
  -716
  -751
  -787
  -826
  -866
  -909
  -953
  -1,000
  -1,049
  -1,100
  -1,154
  -1,212
  -1,271
  -1,335
  -1,400
  -1,470
  -1,542
  -1,619
  -1,700
  -1,784
  -1,873
Free cash flow, $m
  62
  50
  40
  32
  24
  18
  13
  9
  5
  3
  1
  0
  0
  1
  2
  5
  7
  11
  15
  21
  27
  33
  41
  49
  59
  69
  80
  93
  106
  120
Issuance/(repayment) of debt, $m
  2
  2
  3
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
  15
Issuance/(repurchase) of shares, $m
  0
  0
  0
  0
  4
  13
  21
  28
  34
  39
  44
  48
  51
  54
  55
  57
  58
  58
  57
  56
  54
  52
  49
  45
  41
  36
  30
  24
  17
  8
Cash from financing (excl. dividends), $m  
  2
  2
  3
  3
  7
  17
  25
  32
  39
  44
  49
  54
  57
  61
  62
  64
  66
  66
  66
  65
  64
  62
  60
  56
  53
  49
  43
  38
  32
  23
Total cash flow (excl. dividends), $m
  64
  53
  43
  35
  32
  35
  38
  41
  44
  47
  51
  54
  58
  61
  65
  69
  73
  77
  81
  86
  91
  96
  101
  106
  112
  118
  124
  130
  137
  144
Retained Cash Flow (-), $m
  -94
  -123
  -141
  -158
  -175
  -192
  -209
  -226
  -244
  -262
  -280
  -299
  -318
  -338
  -359
  -380
  -403
  -426
  -450
  -475
  -501
  -529
  -557
  -587
  -618
  -651
  -685
  -721
  -759
  -798
Prev. year cash balance distribution, $m
  342
  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
  312
  -71
  -98
  -123
  -143
  -157
  -171
  -186
  -200
  -215
  -230
  -245
  -261
  -277
  -294
  -312
  -330
  -349
  -369
  -389
  -411
  -433
  -456
  -481
  -507
  -533
  -561
  -591
  -621
  -654
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
  299
  -65
  -85
  -102
  -111
  -114
  -116
  -116
  -115
  -112
  -109
  -105
  -99
  -93
  -86
  -79
  -72
  -64
  -57
  -49
  -42
  -36
  -30
  -24
  -20
  -16
  -12
  -9
  -7
  -5
Current shareholders' claim on cash, %
  100.0
  100.0
  100.0
  100.0
  100.0
  99.9
  99.8
  99.7
  99.5
  99.3
  99.1
  99.0
  98.7
  98.5
  98.3
  98.1
  98.0
  97.8
  97.6
  97.4
  97.3
  97.1
  97.0
  96.9
  96.8
  96.7
  96.7
  96.6
  96.6
  96.6

Franco-Nevada Corporation (Franco-Nevada) is a gold-focused royalty and stream company. The Company has interests in silver, platinum group metals, oil and gas and other resource assets. The Company is engaged in resource sector royalty/stream acquisitions and management activities. It has a portfolio of properties in the United States, Canada, Mexico, Peru, Chile and Africa. Its properties in the United States include Goldstrike, Stillwater, Gold Quarry, Marigold, Fire Creek/Midas, Bald Mountain, South Arturo and Other. Its properties in Canada include Sudbury, Detour Lake, Golden Highway, Musselwhite, Hemlo, Kirkland Lake, Timmins West, Canadian Malartic and Other. Its properties in Latin America include Antapaccay, Antamina, Candelaria, Guadalupe-Palmarejo and Other. Its properties in Rest of World include Mine Waste Solutions (MWS), Sabodala, Subika, Tasiast, Karma, Duketon, Edikan and Other.

FINANCIAL RATIOS  of  Franco-Nevada Corporation (FNV)

Valuation Ratios
P/E Ratio 106.1
Price to Sales 21.2
Price to Book 3.1
Price to Tangible Book
Price to Cash Flow 27.5
Price to Free Cash Flow -46.9
Growth Rates
Sales Growth Rate 37.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -26.8%
Cap. Spend. - 3 Yr. Gr. Rate 39.4%
Financial Strength
Quick Ratio NaN
Current Ratio 0.3
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 58
Management Effectiveness
Return On Assets 3.1%
Ret/ On Assets - 3 Yr. Avg. 2.4%
Return On Total Capital 3.1%
Ret/ On T. Cap. - 3 Yr. Avg. 2.4%
Return On Equity 3.3%
Return On Equity - 3 Yr. Avg. 2.5%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 37.9%
Gross Margin - 3 Yr. Avg. 66.8%
EBITDA Margin 72.9%
EBITDA Margin - 3 Yr. Avg. 68.6%
Operating Margin 25.5%
Oper. Margin - 3 Yr. Avg. 24.1%
Pre-Tax Margin 27.5%
Pre-Tax Margin - 3 Yr. Avg. 24.7%
Net Profit Margin 20%
Net Profit Margin - 3 Yr. Avg. 16.5%
Effective Tax Rate 27.3%
Eff/ Tax Rate - 3 Yr. Avg. 36.5%
Payout Ratio 97%

FNV stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the FNV stock intrinsic value calculation we used $824 million for the last fiscal year's total revenue generated by Franco-Nevada Corporation. The default revenue input number comes from 2016 income statement of Franco-Nevada 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 FNV 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 FNV is calculated based on our internal credit rating of Franco-Nevada 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 Franco-Nevada 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 FNV stock the variable cost ratio is equal to 37.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $314 million in the base year in the intrinsic value calculation for FNV 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 3.5% for Franco-Nevada Corporation.

Corporate tax rate of 27% is the nominal tax rate for Franco-Nevada 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 FNV 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 FNV are equal to 567.8%.

Life of production assets of 12.6 years is the average useful life of capital assets used in Franco-Nevada 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 FNV is equal to 11.5%. 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 - $5602 million for Franco-Nevada 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 185.447 million for Franco-Nevada 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 Franco-Nevada Corporation at the current share price and the inputted number of shares is $18.2 billion.

RELATED COMPANIES Price Int.Val. Rating
ABX Barrick Gold C 17.69 1.90  str.sell
FM First Quantum 18.58 4.39  str.sell
G Goldcorp Inc. 18.50 5.23  str.sell
AEM Agnico Eagle M 62.69 5.52  str.sell
K Kinross Gold C 5.09 1.08  str.sell
YRI Yamana Gold In 4.13 1.45  str.sell
NGD New Gold Inc. 2.83 1.23  str.sell

CONTACT US       ASSET ALLOCATION

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

Copyright © X-FIN.com 2005-2018. All rigths reserved.