Intrinsic value of Franco-Nevada Corporation - FNV

Previous Close

$97.64

  Intrinsic Value

$7.55

stock screener

  Rating & Target

str. sell

-92%

Previous close

$97.64

 
Intrinsic value

$7.55

 
Up/down potential

-92%

 
Rating

str. sell

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

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

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

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, %
  37.56
  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
  824
  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
 
  322
  330
  338
  347
  355
  364
  373
  383
  392
  402
  412
  422
  433
  444
  455
  466
  478
  490
  502
  515
  527
  541
  554
  568
  582
  597
  612
  627
  643
  659
Total operating expenses, $m
  614
  636
  652
  668
  686
  704
  725
  746
  769
  793
  818
  844
  872
  902
  932
  965
  998
  1,034
  1,071
  1,109
  1,150
  1,191
  1,236
  1,282
  1,330
  1,381
  1,434
  1,489
  1,547
  1,607
  1,670
Operating income, $m
  210
  204
  208
  214
  221
  230
  240
  251
  264
  278
  294
  312
  331
  352
  374
  398
  424
  452
  482
  514
  548
  584
  623
  664
  708
  755
  804
  857
  912
  971
  1,033
EBITDA, $m
  580
  583
  596
  611
  630
  651
  674
  700
  729
  761
  795
  833
  873
  916
  963
  1,012
  1,065
  1,121
  1,181
  1,245
  1,313
  1,385
  1,461
  1,542
  1,627
  1,717
  1,813
  1,914
  2,020
  2,133
  2,251
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
  227
  204
  208
  214
  221
  229
  239
  250
  263
  277
  293
  311
  329
  350
  372
  396
  422
  449
  479
  511
  545
  581
  619
  660
  703
  750
  799
  851
  906
  964
  1,026
Tax expense, $m
  62
  55
  56
  58
  60
  62
  65
  68
  71
  75
  79
  84
  89
  94
  100
  107
  114
  121
  129
  138
  147
  157
  167
  178
  190
  202
  216
  230
  245
  260
  277
Net income, $m
  165
  149
  152
  156
  161
  167
  175
  183
  192
  203
  214
  227
  240
  255
  272
  289
  308
  328
  350
  373
  398
  424
  452
  482
  513
  547
  583
  621
  661
  704
  749

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $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
  0
Total assets, $m
  5,704
  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
  5,362
  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
  0.154
Average production assets, $m
  4,679
  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
  437
  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
  0
  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
  101
  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
  5,602
  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
  5,703
  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
  0.000
  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
  0.981

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  165
  149
  152
  156
  161
  167
  175
  183
  192
  203
  214
  227
  240
  255
  272
  289
  308
  328
  350
  373
  398
  424
  452
  482
  513
  547
  583
  621
  661
  704
  749
Depreciation, amort., depletion, $m
  370
  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
  645
  528
  540
  553
  570
  588
  609
  632
  658
  685
  715
  748
  783
  820
  860
  903
  949
  997
  1,049
  1,104
  1,162
  1,224
  1,290
  1,359
  1,432
  1,510
  1,591
  1,678
  1,769
  1,865
  1,967
Change in working capital, $m
  9
  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
  636
  526
  537
  551
  567
  585
  606
  628
  653
  681
  711
  743
  777
  814
  854
  897
  942
  990
  1,042
  1,096
  1,154
  1,215
  1,280
  1,349
  1,422
  1,498
  1,580
  1,665
  1,756
  1,852
  1,953
Maintenance CAPEX, $m
  0
  -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
  -1,009
  -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
  -932
  -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
  -296
  61
  49
  38
  29
  20
  13
  7
  2
  -2
  -6
  -8
  -10
  -11
  -12
  -12
  -11
  -10
  -7
  -4
  -1
  4
  9
  15
  21
  29
  37
  46
  56
  68
  80
Issuance/(repayment) of debt, $m
  -621
  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
  1,216
  0
  0
  0
  0
  8
  18
  26
  34
  41
  48
  53
  58
  63
  67
  70
  72
  74
  76
  77
  77
  77
  77
  75
  74
  71
  68
  64
  60
  55
  49
Cash from financing (excl. dividends), $m  
  595
  2
  2
  3
  3
  11
  22
  30
  38
  46
  53
  58
  64
  69
  74
  77
  79
  82
  84
  86
  86
  87
  87
  86
  85
  83
  81
  77
  74
  70
  64
Total cash flow (excl. dividends), $m
  300
  63
  51
  41
  32
  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
  -1,329
  -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
 
  311
  -72
  -100
  -126
  -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
 
  298
  -66
  -87
  -104
  -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
  100.0
  100.0
  100.0
  100.0
  100.0
  99.9
  99.7
  99.6
  99.4
  99.2
  98.9
  98.7
  98.4
  98.2
  97.9
  97.7
  97.4
  97.2
  97.0
  96.7
  96.5
  96.3
  96.1
  95.9
  95.8
  95.6
  95.5
  95.4
  95.3
  95.2

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 105.6
Price to Sales 21.1
Price to Book 3.1
Price to Tangible Book
Price to Cash Flow 27.4
Price to Free Cash Flow -46.7
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 $18.1 billion.

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Financial statements of FNV
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