Intrinsic value of Pan American Silver Corp. - PAAS

Previous Close

$20.59

  Intrinsic Value

$3.09

stock screener

  Rating & Target

str. sell

-85%

Previous close

$20.59

 
Intrinsic value

$3.09

 
Up/down potential

-85%

 
Rating

str. sell

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

We calculate the intrinsic value of PAAS 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, %
  14.80
  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
  1,047
  1,068
  1,093
  1,121
  1,152
  1,187
  1,225
  1,267
  1,312
  1,361
  1,413
  1,469
  1,529
  1,592
  1,660
  1,731
  1,807
  1,887
  1,972
  2,062
  2,157
  2,257
  2,362
  2,473
  2,590
  2,714
  2,844
  2,980
  3,124
  3,275
  3,434
Variable operating expenses, $m
 
  1,431
  1,464
  1,502
  1,544
  1,591
  1,642
  1,698
  1,758
  1,824
  1,893
  1,968
  2,048
  2,133
  2,223
  2,319
  2,421
  2,528
  2,642
  2,762
  2,889
  3,023
  3,164
  3,313
  3,470
  3,635
  3,809
  3,992
  4,185
  4,388
  4,601
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
  798
  1,431
  1,464
  1,502
  1,544
  1,591
  1,642
  1,698
  1,758
  1,824
  1,893
  1,968
  2,048
  2,133
  2,223
  2,319
  2,421
  2,528
  2,642
  2,762
  2,889
  3,023
  3,164
  3,313
  3,470
  3,635
  3,809
  3,992
  4,185
  4,388
  4,601
Operating income, $m
  249
  -363
  -371
  -381
  -392
  -404
  -417
  -431
  -446
  -463
  -480
  -499
  -519
  -541
  -564
  -588
  -614
  -641
  -670
  -700
  -732
  -766
  -802
  -840
  -880
  -922
  -966
  -1,012
  -1,061
  -1,112
  -1,166
EBITDA, $m
  406
  -203
  -207
  -213
  -219
  -225
  -233
  -241
  -249
  -258
  -268
  -279
  -290
  -302
  -315
  -329
  -343
  -358
  -374
  -391
  -409
  -428
  -448
  -469
  -492
  -515
  -540
  -566
  -593
  -622
  -652
Interest expense (income), $m
  3
  2
  3
  4
  4
  5
  6
  7
  8
  10
  11
  12
  14
  16
  17
  19
  21
  23
  25
  28
  30
  33
  36
  39
  42
  45
  48
  52
  56
  60
  64
Earnings before tax, $m
  238
  -365
  -374
  -385
  -396
  -409
  -423
  -438
  -454
  -472
  -491
  -511
  -533
  -556
  -581
  -607
  -635
  -664
  -695
  -728
  -763
  -799
  -838
  -879
  -921
  -967
  -1,014
  -1,064
  -1,117
  -1,172
  -1,230
Tax expense, $m
  100
  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
Net income, $m
  135
  -365
  -374
  -385
  -396
  -409
  -423
  -438
  -454
  -472
  -491
  -511
  -533
  -556
  -581
  -607
  -635
  -664
  -695
  -728
  -763
  -799
  -838
  -879
  -921
  -967
  -1,014
  -1,064
  -1,117
  -1,172
  -1,230

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  294
  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
  2,565
  2,317
  2,370
  2,431
  2,499
  2,575
  2,658
  2,749
  2,847
  2,952
  3,065
  3,187
  3,316
  3,454
  3,600
  3,755
  3,920
  4,094
  4,278
  4,473
  4,678
  4,895
  5,124
  5,365
  5,619
  5,887
  6,168
  6,465
  6,777
  7,105
  7,450
Adjusted assets (=assets-cash), $m
  2,271
  2,317
  2,370
  2,431
  2,499
  2,575
  2,658
  2,749
  2,847
  2,952
  3,065
  3,187
  3,316
  3,454
  3,600
  3,755
  3,920
  4,094
  4,278
  4,473
  4,678
  4,895
  5,124
  5,365
  5,619
  5,887
  6,168
  6,465
  6,777
  7,105
  7,450
Revenue / Adjusted assets
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
  0.461
Average production assets, $m
  1,600
  1,632
  1,669
  1,712
  1,760
  1,814
  1,872
  1,936
  2,005
  2,079
  2,159
  2,245
  2,336
  2,433
  2,536
  2,645
  2,761
  2,884
  3,014
  3,151
  3,296
  3,448
  3,609
  3,779
  3,958
  4,147
  4,345
  4,554
  4,774
  5,005
  5,248
Working capital, $m
  579
  296
  303
  310
  319
  329
  339
  351
  363
  377
  391
  407
  423
  441
  460
  480
  501
  523
  546
  571
  597
  625
  654
  685
  718
  752
  788
  826
  865
  907
  951
Total debt, $m
  59
  67
  82
  101
  121
  143
  168
  195
  224
  255
  288
  324
  363
  403
  447
  493
  541
  593
  647
  705
  766
  830
  898
  969
  1,044
  1,123
  1,207
  1,295
  1,387
  1,484
  1,586
Total liabilities, $m
  678
  686
  701
  720
  740
  762
  787
  814
  843
  874
  907
  943
  982
  1,022
  1,066
  1,112
  1,160
  1,212
  1,266
  1,324
  1,385
  1,449
  1,517
  1,588
  1,663
  1,742
  1,826
  1,914
  2,006
  2,103
  2,205
Total equity, $m
  1,887
  1,631
  1,668
  1,711
  1,759
  1,813
  1,871
  1,935
  2,004
  2,078
  2,158
  2,243
  2,334
  2,431
  2,534
  2,644
  2,760
  2,882
  3,012
  3,149
  3,294
  3,446
  3,607
  3,777
  3,956
  4,144
  4,342
  4,551
  4,771
  5,002
  5,245
Total liabilities and equity, $m
  2,565
  2,317
  2,369
  2,431
  2,499
  2,575
  2,658
  2,749
  2,847
  2,952
  3,065
  3,186
  3,316
  3,453
  3,600
  3,756
  3,920
  4,094
  4,278
  4,473
  4,679
  4,895
  5,124
  5,365
  5,619
  5,886
  6,168
  6,465
  6,777
  7,105
  7,450
Debt-to-equity ratio
  0.031
  0.040
  0.050
  0.060
  0.070
  0.080
  0.090
  0.100
  0.110
  0.120
  0.130
  0.140
  0.160
  0.170
  0.180
  0.190
  0.200
  0.210
  0.210
  0.220
  0.230
  0.240
  0.250
  0.260
  0.260
  0.270
  0.280
  0.280
  0.290
  0.300
  0.300
Adjusted equity ratio
  0.701
  0.704
  0.704
  0.704
  0.704
  0.704
  0.704
  0.704
  0.704
  0.704
  0.704
  0.704
  0.704
  0.704
  0.704
  0.704
  0.704
  0.704
  0.704
  0.704
  0.704
  0.704
  0.704
  0.704
  0.704
  0.704
  0.704
  0.704
  0.704
  0.704
  0.704

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  135
  -365
  -374
  -385
  -396
  -409
  -423
  -438
  -454
  -472
  -491
  -511
  -533
  -556
  -581
  -607
  -635
  -664
  -695
  -728
  -763
  -799
  -838
  -879
  -921
  -967
  -1,014
  -1,064
  -1,117
  -1,172
  -1,230
Depreciation, amort., depletion, $m
  157
  160
  164
  168
  173
  178
  184
  190
  197
  204
  212
  220
  229
  239
  249
  259
  271
  283
  295
  309
  323
  338
  354
  371
  388
  407
  426
  446
  468
  491
  514
Funds from operations, $m
  268
  -205
  -210
  -216
  -223
  -231
  -239
  -248
  -257
  -268
  -279
  -291
  -304
  -318
  -332
  -348
  -364
  -382
  -400
  -419
  -440
  -461
  -484
  -508
  -533
  -560
  -588
  -618
  -649
  -681
  -716
Change in working capital, $m
  -22
  6
  7
  8
  9
  10
  11
  12
  13
  13
  14
  15
  17
  18
  19
  20
  21
  22
  24
  25
  26
  28
  29
  31
  32
  34
  36
  38
  40
  42
  44
Cash from operations, $m
  290
  -211
  -217
  -224
  -232
  -240
  -249
  -259
  -270
  -281
  -294
  -307
  -321
  -335
  -351
  -368
  -385
  -404
  -423
  -444
  -466
  -489
  -513
  -539
  -566
  -594
  -624
  -655
  -688
  -723
  -760
Maintenance CAPEX, $m
  0
  -157
  -160
  -164
  -168
  -173
  -178
  -184
  -190
  -197
  -204
  -212
  -220
  -229
  -239
  -249
  -259
  -271
  -283
  -295
  -309
  -323
  -338
  -354
  -371
  -388
  -407
  -426
  -446
  -468
  -491
New CAPEX, $m
  -274
  -32
  -38
  -43
  -48
  -53
  -59
  -64
  -69
  -74
  -80
  -85
  -91
  -97
  -103
  -109
  -116
  -123
  -130
  -137
  -145
  -153
  -161
  -170
  -179
  -188
  -198
  -209
  -220
  -231
  -243
Cash from investing activities, $m
  -189
  -189
  -198
  -207
  -216
  -226
  -237
  -248
  -259
  -271
  -284
  -297
  -311
  -326
  -342
  -358
  -375
  -394
  -413
  -432
  -454
  -476
  -499
  -524
  -550
  -576
  -605
  -635
  -666
  -699
  -734
Free cash flow, $m
  101
  -400
  -415
  -431
  -448
  -466
  -486
  -507
  -529
  -552
  -577
  -604
  -632
  -661
  -693
  -726
  -760
  -797
  -836
  -877
  -920
  -965
  -1,012
  -1,063
  -1,115
  -1,171
  -1,229
  -1,290
  -1,355
  -1,422
  -1,494
Issuance/(repayment) of debt, $m
  -26
  13
  16
  18
  20
  22
  25
  27
  29
  31
  34
  36
  38
  41
  43
  46
  49
  52
  55
  58
  61
  64
  68
  71
  75
  79
  83
  88
  92
  97
  102
Issuance/(repurchase) of shares, $m
  3
  398
  412
  427
  444
  462
  481
  502
  523
  547
  571
  597
  624
  653
  684
  716
  751
  787
  825
  865
  907
  952
  999
  1,048
  1,100
  1,155
  1,212
  1,273
  1,336
  1,403
  1,473
Cash from financing (excl. dividends), $m  
  -28
  411
  428
  445
  464
  484
  506
  529
  552
  578
  605
  633
  662
  694
  727
  762
  800
  839
  880
  923
  968
  1,016
  1,067
  1,119
  1,175
  1,234
  1,295
  1,361
  1,428
  1,500
  1,575
Total cash flow (excl. dividends), $m
  73
  11
  13
  15
  17
  18
  20
  22
  24
  25
  27
  29
  31
  33
  35
  37
  39
  41
  44
  46
  49
  51
  54
  57
  60
  63
  67
  70
  74
  78
  82
Retained Cash Flow (-), $m
  -134
  -398
  -412
  -427
  -444
  -462
  -481
  -502
  -523
  -547
  -571
  -597
  -624
  -653
  -684
  -716
  -751
  -787
  -825
  -865
  -907
  -952
  -999
  -1,048
  -1,100
  -1,155
  -1,212
  -1,273
  -1,336
  -1,403
  -1,473
Prev. year cash balance distribution, $m
 
  289
  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
 
  -98
  -399
  -413
  -428
  -444
  -461
  -480
  -500
  -521
  -544
  -568
  -594
  -621
  -649
  -680
  -712
  -746
  -781
  -819
  -859
  -901
  -945
  -991
  -1,040
  -1,091
  -1,146
  -1,202
  -1,262
  -1,325
  -1,391
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
 
  -94
  -365
  -359
  -352
  -344
  -335
  -324
  -312
  -299
  -285
  -270
  -253
  -236
  -218
  -200
  -181
  -162
  -144
  -126
  -109
  -93
  -78
  -65
  -53
  -42
  -33
  -26
  -20
  -14
  -10
Current shareholders' claim on cash, %
  100
  87.0
  75.5
  65.4
  56.6
  48.8
  42.1
  36.2
  31.2
  26.8
  23.0
  19.7
  16.9
  14.4
  12.3
  10.5
  9.0
  7.7
  6.6
  5.6
  4.8
  4.1
  3.5
  2.9
  2.5
  2.1
  1.8
  1.5
  1.3
  1.1
  0.9

Pan American Silver Corp. is a silver production company. The Company is principally engaged in the operation and development of, and exploration for, silver producing properties. The Company's segments include Peru, Mexico, Argentina and Bolivia. The Company also produces and sells gold, zinc, lead and copper. The Company's operating properties in Mexico include La Colorada Mine, Dolores and Alamo Dorado. The Company's operating properties in Peru include Huaron Mine and Morococha Mine. The Company's operating properties in Bolivia include San Vicente. The Company's operating properties in Argentina include Manantial Espejo. The Company's development properties include Navidad Property. The La Colorada underground silver mine is located in the Chalchihuites district in Zacatecas State, Mexico, approximately 99 kilometers south of Durango and 156 kilometers northwest of Zacatecas. The La Colorada consists of approximately 60 claims totaling approximately 8,400 hectares.

FINANCIAL RATIOS  of  Pan American Silver Corp. (PAAS)

Valuation Ratios
P/E Ratio 23.2
Price to Sales 3
Price to Book 1.7
Price to Tangible Book
Price to Cash Flow 10.8
Price to Free Cash Flow 196
Growth Rates
Sales Growth Rate 14.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 38.4%
Cap. Spend. - 3 Yr. Gr. Rate 5%
Financial Strength
Quick Ratio 59
Current Ratio 0
LT Debt to Equity 2.9%
Total Debt to Equity 3.1%
Interest Coverage 80
Management Effectiveness
Return On Assets 5.6%
Ret/ On Assets - 3 Yr. Avg. -9.6%
Return On Total Capital 7.1%
Ret/ On T. Cap. - 3 Yr. Avg. -12.1%
Return On Equity 7.4%
Return On Equity - 3 Yr. Avg. -12.5%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 25.7%
Gross Margin - 3 Yr. Avg. 7.4%
EBITDA Margin 38%
EBITDA Margin - 3 Yr. Avg. -12.8%
Operating Margin 23.8%
Oper. Margin - 3 Yr. Avg. -31.5%
Pre-Tax Margin 22.7%
Pre-Tax Margin - 3 Yr. Avg. -32.3%
Net Profit Margin 12.9%
Net Profit Margin - 3 Yr. Avg. -31.1%
Effective Tax Rate 42%
Eff/ Tax Rate - 3 Yr. Avg. 19.5%
Payout Ratio 7.4%

PAAS stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the PAAS stock intrinsic value calculation we used $1047 million for the last fiscal year's total revenue generated by Pan American Silver Corp.. The default revenue input number comes from 2016 income statement of Pan American Silver Corp.. 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 PAAS 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 PAAS is calculated based on our internal credit rating of Pan American Silver Corp., 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 Pan American Silver Corp..
    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 PAAS stock the variable cost ratio is equal to 134%.

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 PAAS 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 4.3% for Pan American Silver Corp..

Corporate tax rate of 27% is the nominal tax rate for Pan American Silver Corp.. 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 PAAS 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 PAAS are equal to 152.8%.

Life of production assets of 10.2 years is the average useful life of capital assets used in Pan American Silver Corp. 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 PAAS is equal to 27.7%. 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 - $1887 million for Pan American Silver Corp. - 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 152.196 million for Pan American Silver Corp. 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 Pan American Silver Corp. at the current share price and the inputted number of shares is $3.1 billion.

RELATED COMPANIES Price Int.Val. Rating
FR First Majestic 8.59 1.26  str.sell
FVI Fortuna Silver 6.00 3.13  str.sell
Financial statements of PAAS
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