Intrinsic value of Osisko Gold Royalties Ltd - OR

Previous Close

$16.03

  Intrinsic Value

$11.04

stock screener

  Rating & Target

sell

-31%

Previous close

$16.03

 
Intrinsic value

$11.04

 
Up/down potential

-31%

 
Rating

sell

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

We calculate the intrinsic value of OR 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 2.5

 

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, %
  40.00
  40.00
  36.50
  33.35
  30.52
  27.96
  25.67
  23.60
  21.74
  20.07
  18.56
  17.20
  15.98
  14.89
  13.90
  13.01
  12.21
  11.49
  10.84
  10.25
  9.73
  9.26
  8.83
  8.45
  8.10
  7.79
  7.51
  7.26
  7.04
  6.83
  6.65
Revenue, $m
  63
  88
  120
  161
  210
  268
  337
  416
  507
  609
  722
  846
  981
  1,127
  1,284
  1,451
  1,628
  1,815
  2,011
  2,218
  2,433
  2,659
  2,893
  3,138
  3,392
  3,656
  3,931
  4,216
  4,513
  4,821
  5,142
Variable operating expenses, $m
 
  31
  38
  47
  57
  70
  86
  103
  123
  146
  170
  187
  217
  249
  283
  320
  359
  401
  444
  490
  537
  587
  639
  693
  749
  807
  868
  931
  997
  1,065
  1,135
Fixed operating expenses, $m
 
  9
  9
  10
  10
  10
  10
  11
  11
  11
  12
  12
  12
  12
  13
  13
  13
  14
  14
  14
  15
  15
  15
  16
  16
  17
  17
  18
  18
  18
  19
Total operating expenses, $m
  34
  40
  47
  57
  67
  80
  96
  114
  134
  157
  182
  199
  229
  261
  296
  333
  372
  415
  458
  504
  552
  602
  654
  709
  765
  824
  885
  949
  1,015
  1,083
  1,154
Operating income, $m
  29
  48
  73
  104
  142
  188
  241
  303
  373
  452
  540
  647
  752
  866
  988
  1,117
  1,255
  1,400
  1,553
  1,714
  1,881
  2,056
  2,239
  2,429
  2,627
  2,832
  3,046
  3,268
  3,499
  3,738
  3,988
EBITDA, $m
  41
  60
  84
  116
  154
  199
  252
  314
  385
  464
  551
  648
  753
  867
  989
  1,119
  1,256
  1,402
  1,555
  1,716
  1,883
  2,059
  2,242
  2,432
  2,630
  2,835
  3,049
  3,272
  3,502
  3,743
  3,992
Interest expense (income), $m
  0
  2
  4
  8
  13
  18
  25
  33
  42
  52
  63
  76
  90
  105
  122
  140
  159
  179
  200
  222
  245
  270
  295
  322
  349
  378
  408
  439
  471
  505
  540
Earnings before tax, $m
  52
  47
  69
  96
  130
  169
  216
  270
  331
  400
  476
  571
  662
  760
  866
  978
  1,096
  1,222
  1,354
  1,492
  1,636
  1,787
  1,944
  2,107
  2,277
  2,454
  2,638
  2,829
  3,027
  3,233
  3,448
Tax expense, $m
  10
  13
  19
  26
  35
  46
  58
  73
  89
  108
  129
  154
  179
  205
  234
  264
  296
  330
  365
  403
  442
  482
  525
  569
  615
  663
  712
  764
  817
  873
  931
Net income, $m
  42
  34
  50
  70
  95
  124
  158
  197
  242
  292
  348
  417
  483
  555
  632
  714
  800
  892
  988
  1,089
  1,194
  1,304
  1,419
  1,538
  1,662
  1,792
  1,926
  2,065
  2,210
  2,360
  2,517

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  501
  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
  1,416
  1,278
  1,745
  2,327
  3,037
  3,886
  4,883
  6,036
  7,348
  8,822
  10,460
  12,259
  14,219
  16,335
  18,605
  21,025
  23,592
  26,301
  29,152
  32,141
  35,267
  38,531
  41,934
  45,476
  49,160
  52,990
  56,971
  61,108
  65,407
  69,876
  74,522
Adjusted assets (=assets-cash), $m
  915
  1,278
  1,745
  2,327
  3,037
  3,886
  4,883
  6,036
  7,348
  8,822
  10,460
  12,259
  14,219
  16,335
  18,605
  21,025
  23,592
  26,301
  29,152
  32,141
  35,267
  38,531
  41,934
  45,476
  49,160
  52,990
  56,971
  61,108
  65,407
  69,876
  74,522
Revenue / Adjusted assets
  0.069
  0.069
  0.069
  0.069
  0.069
  0.069
  0.069
  0.069
  0.069
  0.069
  0.069
  0.069
  0.069
  0.069
  0.069
  0.069
  0.069
  0.069
  0.069
  0.069
  0.069
  0.069
  0.069
  0.069
  0.069
  0.069
  0.069
  0.069
  0.069
  0.069
  0.069
Average production assets, $m
  1
  1
  1
  1
  2
  2
  3
  3
  4
  5
  6
  7
  8
  9
  10
  12
  13
  15
  16
  18
  19
  21
  23
  25
  27
  29
  31
  34
  36
  39
  41
Working capital, $m
  495
  -8
  -11
  -15
  -20
  -25
  -32
  -40
  -48
  -58
  -69
  -80
  -93
  -107
  -122
  -138
  -155
  -172
  -191
  -211
  -231
  -253
  -275
  -298
  -322
  -347
  -373
  -401
  -429
  -458
  -488
Total debt, $m
  46
  127
  231
  361
  519
  709
  931
  1,188
  1,481
  1,809
  2,175
  2,576
  3,013
  3,485
  3,991
  4,531
  5,103
  5,707
  6,343
  7,009
  7,707
  8,434
  9,193
  9,983
  10,805
  11,659
  12,547
  13,469
  14,428
  15,424
  16,460
Total liabilities, $m
  204
  285
  389
  519
  677
  867
  1,089
  1,346
  1,639
  1,967
  2,333
  2,734
  3,171
  3,643
  4,149
  4,689
  5,261
  5,865
  6,501
  7,167
  7,865
  8,592
  9,351
  10,141
  10,963
  11,817
  12,705
  13,627
  14,586
  15,582
  16,618
Total equity, $m
  1,212
  993
  1,356
  1,808
  2,360
  3,019
  3,794
  4,690
  5,709
  6,855
  8,127
  9,526
  11,048
  12,693
  14,456
  16,337
  18,331
  20,436
  22,651
  24,973
  27,403
  29,939
  32,582
  35,334
  38,197
  41,174
  44,267
  47,481
  50,822
  54,294
  57,903
Total liabilities and equity, $m
  1,416
  1,278
  1,745
  2,327
  3,037
  3,886
  4,883
  6,036
  7,348
  8,822
  10,460
  12,260
  14,219
  16,336
  18,605
  21,026
  23,592
  26,301
  29,152
  32,140
  35,268
  38,531
  41,933
  45,475
  49,160
  52,991
  56,972
  61,108
  65,408
  69,876
  74,521
Debt-to-equity ratio
  0.038
  0.130
  0.170
  0.200
  0.220
  0.230
  0.250
  0.250
  0.260
  0.260
  0.270
  0.270
  0.270
  0.270
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
Adjusted equity ratio
  0.777
  0.777
  0.777
  0.777
  0.777
  0.777
  0.777
  0.777
  0.777
  0.777
  0.777
  0.777
  0.777
  0.777
  0.777
  0.777
  0.777
  0.777
  0.777
  0.777
  0.777
  0.777
  0.777
  0.777
  0.777
  0.777
  0.777
  0.777
  0.777
  0.777
  0.777

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  42
  34
  50
  70
  95
  124
  158
  197
  242
  292
  348
  417
  483
  555
  632
  714
  800
  892
  988
  1,089
  1,194
  1,304
  1,419
  1,538
  1,662
  1,792
  1,926
  2,065
  2,210
  2,360
  2,517
Depreciation, amort., depletion, $m
  12
  11
  11
  11
  11
  11
  11
  11
  12
  12
  12
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
  4
Funds from operations, $m
  52
  45
  61
  81
  106
  135
  169
  209
  253
  304
  360
  418
  484
  556
  633
  715
  802
  893
  990
  1,091
  1,196
  1,307
  1,421
  1,541
  1,665
  1,795
  1,929
  2,069
  2,214
  2,365
  2,521
Change in working capital, $m
  -1
  -2
  -3
  -4
  -5
  -6
  -7
  -8
  -9
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -30
Cash from operations, $m
  53
  48
  64
  85
  111
  141
  176
  216
  262
  313
  370
  429
  497
  570
  648
  731
  819
  911
  1,008
  1,110
  1,217
  1,328
  1,444
  1,564
  1,690
  1,820
  1,955
  2,096
  2,242
  2,394
  2,552
Maintenance CAPEX, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -4
  -4
  -4
New CAPEX, $m
  -8
  0
  0
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
Cash from investing activities, $m
  -15
  0
  0
  0
  0
  0
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -7
Free cash flow, $m
  38
  47
  64
  85
  110
  140
  175
  215
  261
  312
  369
  428
  495
  568
  646
  728
  816
  908
  1,005
  1,107
  1,213
  1,324
  1,440
  1,560
  1,685
  1,815
  1,950
  2,090
  2,236
  2,387
  2,545
Issuance/(repayment) of debt, $m
  50
  81
  104
  130
  158
  189
  222
  257
  293
  329
  365
  401
  437
  472
  506
  540
  572
  604
  636
  667
  697
  728
  759
  790
  822
  854
  888
  923
  959
  996
  1,036
Issuance/(repurchase) of shares, $m
  178
  248
  312
  382
  457
  536
  617
  698
  778
  854
  924
  981
  1,039
  1,089
  1,132
  1,167
  1,194
  1,213
  1,227
  1,234
  1,235
  1,232
  1,225
  1,214
  1,200
  1,185
  1,168
  1,149
  1,131
  1,112
  1,093
Cash from financing (excl. dividends), $m  
  223
  329
  416
  512
  615
  725
  839
  955
  1,071
  1,183
  1,289
  1,382
  1,476
  1,561
  1,638
  1,707
  1,766
  1,817
  1,863
  1,901
  1,932
  1,960
  1,984
  2,004
  2,022
  2,039
  2,056
  2,072
  2,090
  2,108
  2,129
Total cash flow (excl. dividends), $m
  256
  377
  480
  597
  725
  865
  1,015
  1,171
  1,331
  1,495
  1,658
  1,810
  1,971
  2,129
  2,284
  2,435
  2,582
  2,726
  2,868
  3,007
  3,146
  3,284
  3,423
  3,563
  3,707
  3,854
  4,005
  4,162
  4,325
  4,496
  4,674
Retained Cash Flow (-), $m
  -276
  -282
  -363
  -452
  -552
  -660
  -775
  -895
  -1,020
  -1,146
  -1,272
  -1,398
  -1,523
  -1,645
  -1,764
  -1,880
  -1,994
  -2,105
  -2,215
  -2,322
  -2,429
  -2,536
  -2,643
  -2,752
  -2,863
  -2,976
  -3,093
  -3,214
  -3,340
  -3,472
  -3,610
Prev. year cash balance distribution, $m
 
  501
  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
 
  595
  118
  144
  174
  206
  240
  275
  312
  349
  386
  412
  449
  485
  520
  554
  588
  621
  653
  685
  716
  748
  779
  811
  844
  877
  912
  948
  985
  1,024
  1,064
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
 
  571
  108
  126
  143
  159
  174
  186
  195
  200
  202
  196
  192
  184
  175
  163
  149
  135
  120
  105
  91
  77
  65
  53
  43
  34
  27
  20
  15
  11
  8
Current shareholders' claim on cash, %
  100
  85.6
  74.3
  65.4
  58.3
  52.6
  47.9
  44.0
  40.7
  38.0
  35.6
  33.7
  32.0
  30.5
  29.3
  28.2
  27.2
  26.4
  25.6
  25.0
  24.4
  23.9
  23.4
  23.0
  22.6
  22.3
  22.0
  21.7
  21.5
  21.3
  21.1

Osisko Gold Royalties Ltd (Osisko) is a Canada-based company engaged in the business of acquiring and managing precious metal and other interests in Canada and across the world. The Company's assets include the Canadian Malartic mine, located in Malartic, Quebec and Eleonore mine, located in the James Bay area in Quebec. It invests in equities of exploration and royalty companies, as well as holds interest in exploration and evaluation projects in over four prolific gold camps: the Abitibi Gold Belt, the James Bay area, the Cariboo mining district and the Guerrero Gold Belt in Mexico. It holds interest in Vezza gold property, which is located over 20 kilometers from Matagami, Quebec, and Cariboo Gold Project, which covers an area of approximately 1,160 square kilometers. It owns a portfolio of royalties, options on royalties and exclusive rights to participate in future royalty/stream financings on various projects, in Canada and the United States.

FINANCIAL RATIOS  of  Osisko Gold Royalties Ltd (OR)

Valuation Ratios
P/E Ratio 40.6
Price to Sales 27.1
Price to Book 1.4
Price to Tangible Book
Price to Cash Flow 32.2
Price to Free Cash Flow 37.9
Growth Rates
Sales Growth Rate 40%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 33.3%
Cap. Spend. - 3 Yr. Gr. Rate 9.9%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 3.8%
Total Debt to Equity 3.8%
Interest Coverage 0
Management Effectiveness
Return On Assets 3.4%
Ret/ On Assets - 3 Yr. Avg. 47.3%
Return On Total Capital 3.8%
Ret/ On T. Cap. - 3 Yr. Avg. 51.2%
Return On Equity 3.9%
Return On Equity - 3 Yr. Avg. 58.9%
Asset Turnover 0.1
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 101.6%
EBITDA Margin - 3 Yr. Avg. 64%
Operating Margin 46%
Oper. Margin - 3 Yr. Avg. 24.8%
Pre-Tax Margin 82.5%
Pre-Tax Margin - 3 Yr. Avg. 56.9%
Net Profit Margin 66.7%
Net Profit Margin - 3 Yr. Avg. 3324.1%
Effective Tax Rate 19.2%
Eff/ Tax Rate - 3 Yr. Avg. 113.6%
Payout Ratio 35.7%

OR stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the OR stock intrinsic value calculation we used $63 million for the last fiscal year's total revenue generated by Osisko Gold Royalties Ltd. The default revenue input number comes from 2016 income statement of Osisko Gold Royalties 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 OR stock valuation model: a) initial revenue growth rate of 40% 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 OR is calculated based on our internal credit rating of Osisko Gold Royalties 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 Osisko Gold Royalties 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 OR stock the variable cost ratio is equal to 39.7%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $9 million in the base year in the intrinsic value calculation for OR 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 Osisko Gold Royalties Ltd.

Corporate tax rate of 27% is the nominal tax rate for Osisko Gold Royalties 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 OR 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 OR are equal to 0.8%.

Life of production assets of 9.3 years is the average useful life of capital assets used in Osisko Gold Royalties 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 OR is equal to -9.5%. 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 - $1212 million for Osisko Gold Royalties 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 156.805 million for Osisko Gold Royalties 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 Osisko Gold Royalties Ltd at the current share price and the inputted number of shares is $2.5 billion.

RELATED COMPANIES Price Int.Val. Rating
Financial statements of OR
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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