Intrinsic value of Klondex Mines Ltd. - KDX

Previous Close

$1.75

  Intrinsic Value

$1.27

stock screener

  Rating & Target

sell

-27%

Previous close

$1.75

 
Intrinsic value

$1.27

 
Up/down potential

-27%

 
Rating

sell

We calculate the intrinsic value of KDX 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 0.3

 

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
  273
  280
  287
  295
  304
  314
  324
  336
  348
  362
  376
  391
  408
  425
  443
  463
  483
  505
  528
  552
  578
  605
  633
  663
  695
  728
  763
  800
  838
  879
Variable operating expenses, $m
  236
  241
  247
  254
  262
  270
  280
  290
  300
  312
  324
  337
  351
  366
  382
  399
  416
  435
  455
  476
  498
  521
  546
  572
  599
  627
  658
  689
  723
  758
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
  236
  241
  247
  254
  262
  270
  280
  290
  300
  312
  324
  337
  351
  366
  382
  399
  416
  435
  455
  476
  498
  521
  546
  572
  599
  627
  658
  689
  723
  758
Operating income, $m
  38
  39
  40
  41
  42
  43
  45
  46
  48
  50
  52
  54
  56
  59
  61
  64
  67
  70
  73
  76
  80
  83
  87
  92
  96
  100
  105
  110
  116
  121
EBITDA, $m
  77
  79
  81
  83
  86
  89
  92
  95
  99
  102
  106
  111
  115
  120
  125
  131
  137
  143
  149
  156
  164
  171
  179
  188
  197
  206
  216
  226
  237
  249
Interest expense (income), $m
  0
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
Earnings before tax, $m
  37
  37
  38
  39
  40
  42
  43
  44
  46
  48
  49
  51
  53
  55
  58
  60
  62
  65
  68
  71
  74
  77
  81
  84
  88
  92
  97
  101
  106
  111
Tax expense, $m
  10
  10
  10
  11
  11
  11
  12
  12
  12
  13
  13
  14
  14
  15
  16
  16
  17
  18
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  29
  30
Net income, $m
  27
  27
  28
  29
  30
  30
  31
  32
  34
  35
  36
  37
  39
  40
  42
  44
  46
  48
  50
  52
  54
  56
  59
  62
  64
  67
  71
  74
  77
  81

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
  458
  468
  480
  494
  509
  525
  543
  563
  584
  606
  630
  655
  683
  712
  742
  775
  809
  846
  884
  925
  968
  1,013
  1,060
  1,111
  1,164
  1,219
  1,278
  1,339
  1,404
  1,473
Adjusted assets (=assets-cash), $m
  458
  468
  480
  494
  509
  525
  543
  563
  584
  606
  630
  655
  683
  712
  742
  775
  809
  846
  884
  925
  968
  1,013
  1,060
  1,111
  1,164
  1,219
  1,278
  1,339
  1,404
  1,473
Revenue / Adjusted assets
  0.596
  0.598
  0.598
  0.597
  0.597
  0.598
  0.597
  0.597
  0.596
  0.597
  0.597
  0.597
  0.597
  0.597
  0.597
  0.597
  0.597
  0.597
  0.597
  0.597
  0.597
  0.597
  0.597
  0.597
  0.597
  0.597
  0.597
  0.597
  0.597
  0.597
Average production assets, $m
  250
  256
  262
  270
  278
  287
  296
  307
  318
  331
  344
  358
  372
  388
  405
  423
  442
  461
  482
  505
  528
  553
  579
  606
  635
  665
  697
  731
  766
  804
Working capital, $m
  -8
  -8
  -9
  -9
  -9
  -9
  -10
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
Total debt, $m
  33
  36
  39
  43
  47
  52
  57
  62
  68
  74
  81
  88
  96
  104
  113
  122
  131
  142
  152
  164
  176
  189
  202
  216
  231
  247
  263
  280
  299
  318
Total liabilities, $m
  129
  132
  135
  139
  143
  148
  153
  158
  164
  170
  177
  184
  192
  200
  209
  218
  227
  238
  248
  260
  272
  285
  298
  312
  327
  343
  359
  376
  395
  414
Total equity, $m
  329
  337
  345
  355
  366
  378
  391
  405
  420
  436
  453
  471
  491
  512
  534
  557
  582
  608
  636
  665
  696
  728
  762
  799
  837
  877
  919
  963
  1,010
  1,059
Total liabilities and equity, $m
  458
  469
  480
  494
  509
  526
  544
  563
  584
  606
  630
  655
  683
  712
  743
  775
  809
  846
  884
  925
  968
  1,013
  1,060
  1,111
  1,164
  1,220
  1,278
  1,339
  1,405
  1,473
Debt-to-equity ratio
  0.100
  0.110
  0.110
  0.120
  0.130
  0.140
  0.150
  0.150
  0.160
  0.170
  0.180
  0.190
  0.200
  0.200
  0.210
  0.220
  0.230
  0.230
  0.240
  0.250
  0.250
  0.260
  0.260
  0.270
  0.280
  0.280
  0.290
  0.290
  0.300
  0.300
Adjusted equity ratio
  0.719
  0.719
  0.719
  0.719
  0.719
  0.719
  0.719
  0.719
  0.719
  0.719
  0.719
  0.719
  0.719
  0.719
  0.719
  0.719
  0.719
  0.719
  0.719
  0.719
  0.719
  0.719
  0.719
  0.719
  0.719
  0.719
  0.719
  0.719
  0.719
  0.719

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  27
  27
  28
  29
  30
  30
  31
  32
  34
  35
  36
  37
  39
  40
  42
  44
  46
  48
  50
  52
  54
  56
  59
  62
  64
  67
  71
  74
  77
  81
Depreciation, amort., depletion, $m
  40
  41
  42
  43
  44
  46
  47
  49
  51
  52
  55
  57
  59
  62
  64
  67
  70
  73
  77
  80
  84
  88
  92
  96
  101
  106
  111
  116
  122
  128
Funds from operations, $m
  66
  68
  70
  71
  74
  76
  78
  81
  84
  87
  91
  94
  98
  102
  106
  111
  116
  121
  126
  132
  138
  144
  151
  158
  165
  173
  181
  190
  199
  208
Change in working capital, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
Cash from operations, $m
  67
  68
  70
  72
  74
  76
  79
  81
  84
  88
  91
  95
  98
  102
  107
  111
  116
  121
  127
  133
  139
  145
  152
  159
  166
  174
  182
  191
  200
  210
Maintenance CAPEX, $m
  -39
  -40
  -41
  -42
  -43
  -44
  -46
  -47
  -49
  -51
  -52
  -55
  -57
  -59
  -62
  -64
  -67
  -70
  -73
  -77
  -80
  -84
  -88
  -92
  -96
  -101
  -106
  -111
  -116
  -122
New CAPEX, $m
  -5
  -6
  -7
  -7
  -8
  -9
  -10
  -11
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -25
  -26
  -27
  -29
  -30
  -32
  -34
  -35
  -37
Cash from investing activities, $m
  -44
  -46
  -48
  -49
  -51
  -53
  -56
  -58
  -60
  -63
  -65
  -69
  -72
  -75
  -79
  -82
  -86
  -90
  -94
  -99
  -103
  -109
  -114
  -119
  -125
  -131
  -138
  -145
  -151
  -159
Free cash flow, $m
  23
  23
  23
  23
  23
  23
  23
  24
  24
  25
  25
  26
  27
  28
  28
  29
  30
  31
  33
  34
  35
  36
  38
  39
  41
  43
  45
  47
  49
  51
Issuance/(repayment) of debt, $m
  3
  3
  3
  4
  4
  5
  5
  5
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
  16
  16
  17
  18
  19
Issuance/(repurchase) of shares, $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 from financing (excl. dividends), $m  
  3
  3
  3
  4
  4
  5
  5
  5
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
  16
  16
  17
  18
  19
Total cash flow (excl. dividends), $m
  26
  26
  26
  27
  27
  28
  28
  29
  30
  31
  32
  33
  34
  36
  37
  39
  40
  42
  43
  45
  47
  49
  51
  54
  56
  59
  61
  64
  67
  70
Retained Cash Flow (-), $m
  -6
  -8
  -9
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -20
  -21
  -22
  -23
  -25
  -26
  -28
  -29
  -31
  -33
  -34
  -36
  -38
  -40
  -42
  -44
  -47
  -49
Prev. year cash balance distribution, $m
  53
  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
  72
  18
  17
  17
  16
  16
  16
  15
  15
  15
  15
  15
  15
  15
  15
  15
  15
  15
  16
  16
  16
  17
  17
  18
  18
  18
  19
  20
  20
  21
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
  69
  17
  15
  14
  13
  12
  11
  10
  9
  8
  7
  6
  6
  5
  4
  4
  3
  3
  2
  2
  2
  1
  1
  1
  1
  1
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Klondex Mines Ltd is a Canada-based gold and silver mining company. The Company focuses on exploration, development and production of over two gold and silver projects in north central Nevada, being the Fire Creek mine located in Lander County, Nevada, the Midas mine and ore milling facility located in Nevada. Its segments include Fire Creek, Midas, True North, and Corporate and other. Its over 1,000 tons per day milling facility processes mineralized materials from the Midas Mine and the Fire Creek Mine. The Midas Mine is a gold-silver vein deposit located a mile from the town of Midas, Nevada. It also owns an underground mine project located in Manitoba, Canada, which includes the Rice Lake Mine and Mill complex, and early-stage exploration properties located in the State of Nevada, the United States, and Manitoba and Ontario, Canada. The Company's milling and processing facilities are located at Midas process ore from both Midas and Fire Creek in the State of Nevada.

FINANCIAL RATIOS  of  Klondex Mines Ltd. (KDX)

Valuation Ratios
P/E Ratio -153.3
Price to Sales 1.1
Price to Book 0.8
Price to Tangible Book
Price to Cash Flow 5
Price to Free Cash Flow -13.9
Growth Rates
Sales Growth Rate 28.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 33.9%
Cap. Spend. - 3 Yr. Gr. Rate 25.2%
Financial Strength
Quick Ratio 6
Current Ratio 0
LT Debt to Equity 8%
Total Debt to Equity 10.9%
Interest Coverage 0
Management Effectiveness
Return On Assets -0.5%
Ret/ On Assets - 3 Yr. Avg. 12.2%
Return On Total Capital -0.6%
Ret/ On T. Cap. - 3 Yr. Avg. 13.7%
Return On Equity -0.7%
Return On Equity - 3 Yr. Avg. 17%
Asset Turnover 0.7
Profitability Ratios
Gross Margin 32.1%
Gross Margin - 3 Yr. Avg. 36.2%
EBITDA Margin 15.7%
EBITDA Margin - 3 Yr. Avg. 35.2%
Operating Margin 7.5%
Oper. Margin - 3 Yr. Avg. 13.3%
Pre-Tax Margin 1.1%
Pre-Tax Margin - 3 Yr. Avg. 16.2%
Net Profit Margin -0.7%
Net Profit Margin - 3 Yr. Avg. 17.3%
Effective Tax Rate 166.7%
Eff/ Tax Rate - 3 Yr. Avg. 46.8%
Payout Ratio 0%

KDX stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the KDX stock intrinsic value calculation we used $268 million for the last fiscal year's total revenue generated by Klondex Mines Ltd.. The default revenue input number comes from 2016 income statement of Klondex Mines Ltd.. 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 KDX 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 KDX is calculated based on our internal credit rating of Klondex Mines Ltd., 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 Klondex Mines Ltd..
    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 KDX stock the variable cost ratio is equal to 86.2%.

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 KDX 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 Klondex Mines Ltd..

Corporate tax rate of 27% is the nominal tax rate for Klondex Mines Ltd.. 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 KDX 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 KDX are equal to 91.4%.

Life of production assets of 6.3 years is the average useful life of capital assets used in Klondex Mines Ltd. 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 KDX is equal to -3%. 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 - $376 million for Klondex Mines Ltd. - 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 178.387 million for Klondex Mines Ltd. 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 Klondex Mines Ltd. at the current share price and the inputted number of shares is $0.3 billion.

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