Intrinsic value of Osisko Gold Royalties Ltd - OR

Previous Close

$14.34

  Intrinsic Value

$5.31

stock screener

  Rating & Target

str. sell

-63%

Previous close

$14.34

 
Intrinsic value

$5.31

 
Up/down potential

-63%

 
Rating

str. 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 2.3

 

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
  12.50
  11.75
  11.08
  10.47
  9.92
  9.43
  8.99
  8.59
  8.23
  7.91
  7.62
  7.35
  7.12
  6.91
  6.72
  6.54
  6.39
  6.25
  6.13
  6.01
  5.91
  5.82
  5.74
  5.66
  5.60
  5.54
  5.48
  5.44
  5.39
  5.35
Revenue, $m
  63
  71
  79
  88
  97
  107
  117
  127
  138
  150
  162
  174
  187
  200
  214
  228
  243
  259
  275
  292
  309
  327
  346
  366
  387
  409
  431
  455
  480
  506
  533
Variable operating expenses, $m
 
  27
  29
  31
  33
  35
  37
  39
  42
  44
  47
  38
  41
  44
  47
  50
  54
  57
  61
  64
  68
  72
  76
  81
  85
  90
  95
  100
  106
  112
  118
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
  36
  38
  41
  43
  45
  47
  50
  53
  55
  59
  50
  53
  56
  60
  63
  67
  71
  75
  78
  83
  87
  91
  97
  101
  107
  112
  118
  124
  130
  137
Operating income, $m
  29
  35
  41
  48
  55
  62
  70
  77
  86
  94
  103
  124
  133
  143
  154
  165
  176
  188
  200
  213
  226
  240
  254
  270
  285
  302
  319
  337
  356
  376
  396
EBITDA, $m
  41
  46
  52
  59
  66
  73
  81
  89
  97
  106
  115
  124
  133
  144
  154
  165
  176
  188
  200
  213
  226
  240
  255
  270
  286
  302
  319
  337
  356
  376
  397
Interest expense (income), $m
  0
  2
  2
  3
  4
  5
  7
  8
  9
  10
  11
  13
  14
  16
  17
  19
  20
  22
  24
  26
  27
  29
  31
  34
  36
  38
  41
  43
  46
  49
  52
Earnings before tax, $m
  52
  33
  39
  44
  50
  56
  63
  70
  77
  84
  92
  111
  119
  128
  137
  146
  156
  166
  176
  187
  199
  211
  223
  236
  249
  264
  278
  294
  310
  327
  345
Tax expense, $m
  10
  9
  10
  12
  14
  15
  17
  19
  21
  23
  25
  30
  32
  35
  37
  39
  42
  45
  48
  51
  54
  57
  60
  64
  67
  71
  75
  79
  84
  88
  93
Net income, $m
  42
  24
  28
  32
  37
  41
  46
  51
  56
  61
  67
  81
  87
  93
  100
  107
  114
  121
  129
  137
  145
  154
  163
  172
  182
  192
  203
  214
  226
  239
  251

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
  1,027
  1,148
  1,275
  1,408
  1,548
  1,694
  1,846
  2,005
  2,170
  2,341
  2,520
  2,705
  2,898
  3,098
  3,306
  3,522
  3,747
  3,981
  4,225
  4,479
  4,744
  5,020
  5,308
  5,609
  5,923
  6,251
  6,594
  6,952
  7,327
  7,720
Adjusted assets (=assets-cash), $m
  915
  1,027
  1,148
  1,275
  1,408
  1,548
  1,694
  1,846
  2,005
  2,170
  2,341
  2,520
  2,705
  2,898
  3,098
  3,306
  3,522
  3,747
  3,981
  4,225
  4,479
  4,744
  5,020
  5,308
  5,609
  5,923
  6,251
  6,594
  6,952
  7,327
  7,720
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
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
Working capital, $m
  495
  -7
  -8
  -8
  -9
  -10
  -11
  -12
  -13
  -14
  -15
  -17
  -18
  -19
  -20
  -22
  -23
  -25
  -26
  -28
  -29
  -31
  -33
  -35
  -37
  -39
  -41
  -43
  -46
  -48
  -51
Total debt, $m
  46
  71
  98
  126
  156
  187
  220
  254
  289
  326
  364
  404
  445
  488
  533
  579
  627
  678
  730
  784
  841
  900
  962
  1,026
  1,093
  1,163
  1,236
  1,312
  1,392
  1,476
  1,563
Total liabilities, $m
  204
  229
  256
  284
  314
  345
  378
  412
  447
  484
  522
  562
  603
  646
  691
  737
  785
  836
  888
  942
  999
  1,058
  1,120
  1,184
  1,251
  1,321
  1,394
  1,470
  1,550
  1,634
  1,721
Total equity, $m
  1,212
  798
  892
  991
  1,094
  1,203
  1,316
  1,435
  1,558
  1,686
  1,819
  1,958
  2,102
  2,251
  2,407
  2,569
  2,737
  2,912
  3,094
  3,283
  3,480
  3,686
  3,901
  4,125
  4,358
  4,602
  4,857
  5,124
  5,402
  5,693
  5,998
Total liabilities and equity, $m
  1,416
  1,027
  1,148
  1,275
  1,408
  1,548
  1,694
  1,847
  2,005
  2,170
  2,341
  2,520
  2,705
  2,897
  3,098
  3,306
  3,522
  3,748
  3,982
  4,225
  4,479
  4,744
  5,021
  5,309
  5,609
  5,923
  6,251
  6,594
  6,952
  7,327
  7,719
Debt-to-equity ratio
  0.038
  0.090
  0.110
  0.130
  0.140
  0.160
  0.170
  0.180
  0.190
  0.190
  0.200
  0.210
  0.210
  0.220
  0.220
  0.230
  0.230
  0.230
  0.240
  0.240
  0.240
  0.240
  0.250
  0.250
  0.250
  0.250
  0.250
  0.260
  0.260
  0.260
  0.260
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
  24
  28
  32
  37
  41
  46
  51
  56
  61
  67
  81
  87
  93
  100
  107
  114
  121
  129
  137
  145
  154
  163
  172
  182
  192
  203
  214
  226
  239
  251
Depreciation, amort., depletion, $m
  12
  11
  11
  11
  11
  11
  11
  11
  11
  11
  11
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Funds from operations, $m
  52
  35
  39
  44
  48
  52
  57
  62
  67
  73
  78
  81
  87
  93
  100
  107
  114
  121
  129
  137
  145
  154
  163
  172
  182
  193
  204
  215
  227
  239
  252
Change in working capital, $m
  -1
  -1
  -1
  -1
  -1
  -1
  -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 operations, $m
  53
  36
  40
  44
  49
  53
  58
  63
  68
  74
  79
  82
  88
  95
  101
  108
  115
  123
  130
  139
  147
  156
  165
  174
  184
  195
  206
  217
  229
  241
  255
Maintenance CAPEX, $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
  0
New CAPEX, $m
  -64
  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 investing activities, $m
  -15
  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
Free cash flow, $m
  38
  36
  40
  44
  49
  53
  58
  63
  68
  74
  79
  82
  88
  94
  101
  108
  115
  122
  130
  138
  147
  155
  164
  174
  184
  194
  205
  217
  228
  241
  254
Issuance/(repayment) of debt, $m
  50
  25
  27
  28
  30
  31
  33
  34
  35
  37
  38
  40
  41
  43
  45
  46
  48
  50
  52
  54
  57
  59
  62
  64
  67
  70
  73
  76
  80
  84
  87
Issuance/(repurchase) of shares, $m
  178
  63
  66
  66
  67
  67
  67
  67
  67
  67
  66
  58
  57
  56
  56
  55
  54
  54
  53
  53
  52
  52
  52
  52
  52
  52
  52
  52
  52
  53
  53
Cash from financing (excl. dividends), $m  
  223
  88
  93
  94
  97
  98
  100
  101
  102
  104
  104
  98
  98
  99
  101
  101
  102
  104
  105
  107
  109
  111
  114
  116
  119
  122
  125
  128
  132
  137
  140
Total cash flow (excl. dividends), $m
  256
  124
  133
  139
  145
  152
  158
  164
  171
  177
  184
  179
  186
  194
  201
  209
  218
  226
  236
  245
  256
  266
  278
  290
  303
  316
  330
  345
  361
  377
  395
Retained Cash Flow (-), $m
  -276
  -87
  -94
  -99
  -104
  -109
  -113
  -118
  -123
  -128
  -133
  -139
  -144
  -150
  -155
  -162
  -168
  -175
  -182
  -190
  -197
  -206
  -215
  -224
  -234
  -244
  -255
  -266
  -279
  -291
  -305
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
 
  538
  39
  40
  42
  43
  45
  46
  47
  49
  50
  41
  42
  44
  46
  48
  50
  52
  54
  56
  58
  61
  63
  66
  69
  72
  75
  79
  82
  86
  90
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
 
  516
  35
  35
  34
  33
  32
  31
  30
  28
  26
  19
  18
  17
  15
  14
  13
  11
  10
  9
  7
  6
  5
  4
  4
  3
  2
  2
  1
  1
  1
Current shareholders' claim on cash, %
  100
  95.5
  91.4
  87.9
  84.8
  82.1
  79.7
  77.5
  75.6
  73.9
  72.4
  71.2
  70.1
  69.1
  68.2
  67.4
  66.6
  65.9
  65.3
  64.7
  64.1
  63.6
  63.1
  62.7
  62.3
  61.9
  61.5
  61.1
  60.8
  60.5
  60.2

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 36.4
Price to Sales 24.2
Price to Book 1.3
Price to Tangible Book
Price to Cash Flow 28.8
Price to Free Cash Flow -138.8
Growth Rates
Sales Growth Rate 40%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 64.1%
Cap. Spend. - 3 Yr. Gr. Rate 66.5%
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 12.5% 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 156.999 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 $2.3 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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