Intrinsic value of Barrick Gold Corporation - ABX

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$25.98

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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Previous close

$25.98

 
Intrinsic value

$1.86

 
Up/down potential

-93%

 
Rating

str. sell

 
Value-price divergence* premium content

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

We calculate the intrinsic value of ABX 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 31.0

 

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, %
  -5.21
  3.60
  3.74
  3.87
  3.98
  4.08
  4.17
  4.26
  4.33
  4.40
  4.46
  4.51
  4.56
  4.60
  4.64
  4.68
  4.71
  4.74
  4.77
  4.79
  4.81
  4.83
  4.85
  4.86
  4.88
  4.89
  4.90
  4.91
  4.92
  4.93
  4.93
Revenue, $m
  11,563
  11,979
  12,427
  12,908
  13,421
  13,969
  14,552
  15,171
  15,828
  16,525
  17,261
  18,040
  18,863
  19,731
  20,648
  21,614
  22,632
  23,705
  24,835
  26,025
  27,277
  28,594
  29,980
  31,437
  32,970
  34,582
  36,276
  38,057
  39,929
  41,896
  43,964
Variable operating expenses, $m
 
  15,087
  15,645
  16,242
  16,881
  17,563
  18,288
  19,058
  19,876
  20,741
  21,658
  22,441
  23,465
  24,545
  25,685
  26,887
  28,154
  29,489
  30,894
  32,374
  33,932
  35,570
  37,294
  39,108
  41,015
  43,019
  45,127
  47,343
  49,671
  52,119
  54,690
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
  8,288
  15,087
  15,645
  16,242
  16,881
  17,563
  18,288
  19,058
  19,876
  20,741
  21,658
  22,441
  23,465
  24,545
  25,685
  26,887
  28,154
  29,489
  30,894
  32,374
  33,932
  35,570
  37,294
  39,108
  41,015
  43,019
  45,127
  47,343
  49,671
  52,119
  54,690
Operating income, $m
  3,275
  -3,108
  -3,217
  -3,334
  -3,460
  -3,593
  -3,736
  -3,887
  -4,047
  -4,217
  -4,397
  -4,401
  -4,602
  -4,814
  -5,038
  -5,273
  -5,522
  -5,784
  -6,059
  -6,350
  -6,655
  -6,976
  -7,315
  -7,670
  -8,044
  -8,437
  -8,851
  -9,285
  -9,742
  -10,222
  -10,726
EBITDA, $m
  5,402
  -908
  -942
  -978
  -1,017
  -1,058
  -1,103
  -1,149
  -1,199
  -1,252
  -1,308
  -1,367
  -1,429
  -1,495
  -1,564
  -1,638
  -1,715
  -1,796
  -1,882
  -1,972
  -2,067
  -2,166
  -2,271
  -2,382
  -2,498
  -2,620
  -2,749
  -2,883
  -3,025
  -3,174
  -3,331
Interest expense (income), $m
  693
  600
  647
  699
  754
  812
  875
  942
  1,013
  1,088
  1,168
  1,252
  1,341
  1,435
  1,535
  1,639
  1,750
  1,867
  1,989
  2,119
  2,255
  2,398
  2,549
  2,708
  2,874
  3,050
  3,234
  3,428
  3,632
  3,846
  4,072
Earnings before tax, $m
  2,402
  -3,708
  -3,865
  -4,033
  -4,213
  -4,406
  -4,611
  -4,829
  -5,060
  -5,305
  -5,564
  -5,653
  -5,943
  -6,249
  -6,572
  -6,913
  -7,272
  -7,650
  -8,049
  -8,468
  -8,910
  -9,375
  -9,864
  -10,378
  -10,919
  -11,487
  -12,085
  -12,714
  -13,374
  -14,068
  -14,798
Tax expense, $m
  1,239
  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
  885
  -3,708
  -3,865
  -4,033
  -4,213
  -4,406
  -4,611
  -4,829
  -5,060
  -5,305
  -5,564
  -5,653
  -5,943
  -6,249
  -6,572
  -6,913
  -7,272
  -7,650
  -8,049
  -8,468
  -8,910
  -9,375
  -9,864
  -10,378
  -10,919
  -11,487
  -12,085
  -12,714
  -13,374
  -14,068
  -14,798

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  3,228
  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
  34,134
  32,030
  33,228
  34,513
  35,886
  37,351
  38,909
  40,565
  42,322
  44,183
  46,153
  48,235
  50,435
  52,757
  55,207
  57,791
  60,514
  63,382
  66,404
  69,584
  72,932
  76,454
  80,160
  84,057
  88,156
  92,465
  96,996
  101,758
  106,763
  112,023
  117,550
Adjusted assets (=assets-cash), $m
  30,906
  32,030
  33,228
  34,513
  35,886
  37,351
  38,909
  40,565
  42,322
  44,183
  46,153
  48,235
  50,435
  52,757
  55,207
  57,791
  60,514
  63,382
  66,404
  69,584
  72,932
  76,454
  80,160
  84,057
  88,156
  92,465
  96,996
  101,758
  106,763
  112,023
  117,550
Revenue / Adjusted assets
  0.374
  0.374
  0.374
  0.374
  0.374
  0.374
  0.374
  0.374
  0.374
  0.374
  0.374
  0.374
  0.374
  0.374
  0.374
  0.374
  0.374
  0.374
  0.374
  0.374
  0.374
  0.374
  0.374
  0.374
  0.374
  0.374
  0.374
  0.374
  0.374
  0.374
  0.374
Average production assets, $m
  19,645
  20,353
  21,114
  21,930
  22,803
  23,734
  24,724
  25,776
  26,893
  28,075
  29,327
  30,650
  32,048
  33,523
  35,080
  36,722
  38,452
  40,275
  42,195
  44,216
  46,343
  48,581
  50,936
  53,412
  56,017
  58,755
  61,634
  64,660
  67,840
  71,182
  74,694
Working capital, $m
  4,127
  1,126
  1,168
  1,213
  1,262
  1,313
  1,368
  1,426
  1,488
  1,553
  1,623
  1,696
  1,773
  1,855
  1,941
  2,032
  2,127
  2,228
  2,334
  2,446
  2,564
  2,688
  2,818
  2,955
  3,099
  3,251
  3,410
  3,577
  3,753
  3,938
  4,133
Total debt, $m
  10,715
  11,357
  12,256
  13,221
  14,252
  15,352
  16,523
  17,767
  19,086
  20,484
  21,963
  23,526
  25,179
  26,923
  28,763
  30,703
  32,748
  34,902
  37,171
  39,560
  42,074
  44,719
  47,502
  50,429
  53,507
  56,743
  60,146
  63,722
  67,481
  71,431
  75,582
Total liabilities, $m
  23,413
  24,055
  24,954
  25,919
  26,950
  28,050
  29,221
  30,465
  31,784
  33,182
  34,661
  36,224
  37,877
  39,621
  41,461
  43,401
  45,446
  47,600
  49,869
  52,258
  54,772
  57,417
  60,200
  63,127
  66,205
  69,441
  72,844
  76,420
  80,179
  84,129
  88,280
Total equity, $m
  10,721
  7,976
  8,274
  8,594
  8,936
  9,300
  9,688
  10,101
  10,538
  11,002
  11,492
  12,011
  12,558
  13,137
  13,747
  14,390
  15,068
  15,782
  16,535
  17,326
  18,160
  19,037
  19,960
  20,930
  21,951
  23,024
  24,152
  25,338
  26,584
  27,894
  29,270
Total liabilities and equity, $m
  34,134
  32,031
  33,228
  34,513
  35,886
  37,350
  38,909
  40,566
  42,322
  44,184
  46,153
  48,235
  50,435
  52,758
  55,208
  57,791
  60,514
  63,382
  66,404
  69,584
  72,932
  76,454
  80,160
  84,057
  88,156
  92,465
  96,996
  101,758
  106,763
  112,023
  117,550
Debt-to-equity ratio
  0.999
  1.420
  1.480
  1.540
  1.600
  1.650
  1.710
  1.760
  1.810
  1.860
  1.910
  1.960
  2.000
  2.050
  2.090
  2.130
  2.170
  2.210
  2.250
  2.280
  2.320
  2.350
  2.380
  2.410
  2.440
  2.460
  2.490
  2.510
  2.540
  2.560
  2.580
Adjusted equity ratio
  0.242
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  885
  -3,708
  -3,865
  -4,033
  -4,213
  -4,406
  -4,611
  -4,829
  -5,060
  -5,305
  -5,564
  -5,653
  -5,943
  -6,249
  -6,572
  -6,913
  -7,272
  -7,650
  -8,049
  -8,468
  -8,910
  -9,375
  -9,864
  -10,378
  -10,919
  -11,487
  -12,085
  -12,714
  -13,374
  -14,068
  -14,798
Depreciation, amort., depletion, $m
  2,127
  2,200
  2,276
  2,357
  2,443
  2,535
  2,633
  2,737
  2,848
  2,965
  3,089
  3,035
  3,173
  3,319
  3,473
  3,636
  3,807
  3,988
  4,178
  4,378
  4,588
  4,810
  5,043
  5,288
  5,546
  5,817
  6,102
  6,402
  6,717
  7,048
  7,395
Funds from operations, $m
  1,217
  -1,507
  -1,589
  -1,677
  -1,770
  -1,871
  -1,978
  -2,091
  -2,212
  -2,340
  -2,475
  -2,619
  -2,770
  -2,930
  -3,099
  -3,277
  -3,465
  -3,663
  -3,871
  -4,091
  -4,322
  -4,565
  -4,820
  -5,090
  -5,372
  -5,670
  -5,983
  -6,312
  -6,657
  -7,021
  -7,403
Change in working capital, $m
  -2,350
  39
  42
  45
  48
  51
  55
  58
  62
  65
  69
  73
  77
  82
  86
  91
  96
  101
  106
  112
  118
  124
  130
  137
  144
  151
  159
  167
  176
  185
  194
Cash from operations, $m
  3,567
  -1,769
  -1,631
  -1,722
  -1,819
  -1,922
  -2,032
  -2,150
  -2,274
  -2,405
  -2,545
  -2,692
  -2,847
  -3,012
  -3,185
  -3,368
  -3,561
  -3,764
  -3,977
  -4,202
  -4,439
  -4,688
  -4,951
  -5,227
  -5,517
  -5,822
  -6,142
  -6,479
  -6,833
  -7,206
  -7,597
Maintenance CAPEX, $m
  0
  -1,945
  -2,015
  -2,090
  -2,171
  -2,258
  -2,350
  -2,448
  -2,552
  -2,663
  -2,780
  -2,904
  -3,035
  -3,173
  -3,319
  -3,473
  -3,636
  -3,807
  -3,988
  -4,178
  -4,378
  -4,588
  -4,810
  -5,043
  -5,288
  -5,546
  -5,817
  -6,102
  -6,402
  -6,717
  -7,048
New CAPEX, $m
  -1,521
  -708
  -761
  -816
  -873
  -931
  -990
  -1,052
  -1,116
  -1,183
  -1,251
  -1,323
  -1,398
  -1,476
  -1,557
  -1,642
  -1,730
  -1,823
  -1,920
  -2,021
  -2,127
  -2,238
  -2,355
  -2,477
  -2,604
  -2,738
  -2,879
  -3,026
  -3,180
  -3,342
  -3,512
Cash from investing activities, $m
  -557
  -2,653
  -2,776
  -2,906
  -3,044
  -3,189
  -3,340
  -3,500
  -3,668
  -3,846
  -4,031
  -4,227
  -4,433
  -4,649
  -4,876
  -5,115
  -5,366
  -5,630
  -5,908
  -6,199
  -6,505
  -6,826
  -7,165
  -7,520
  -7,892
  -8,284
  -8,696
  -9,128
  -9,582
  -10,059
  -10,560
Free cash flow, $m
  3,010
  -4,422
  -4,407
  -4,628
  -4,863
  -5,111
  -5,373
  -5,650
  -5,942
  -6,251
  -6,576
  -6,919
  -7,280
  -7,660
  -8,061
  -8,483
  -8,927
  -9,393
  -9,885
  -10,401
  -10,944
  -11,515
  -12,115
  -12,746
  -13,409
  -14,106
  -14,838
  -15,607
  -16,416
  -17,265
  -18,157
Issuance/(repayment) of debt, $m
  -2,779
  835
  900
  965
  1,031
  1,100
  1,171
  1,244
  1,319
  1,398
  1,479
  1,564
  1,652
  1,744
  1,840
  1,940
  2,045
  2,154
  2,269
  2,389
  2,514
  2,645
  2,783
  2,927
  3,078
  3,236
  3,402
  3,576
  3,759
  3,950
  4,151
Issuance/(repurchase) of shares, $m
  0
  842
  3,806
  3,984
  4,173
  4,375
  4,590
  4,818
  5,060
  5,316
  5,587
  5,873
  6,176
  6,495
  6,831
  7,186
  7,560
  7,953
  8,368
  8,804
  9,264
  9,747
  10,255
  10,790
  11,352
  11,943
  12,564
  13,217
  13,903
  14,624
  15,382
Cash from financing (excl. dividends), $m  
  -2,987
  1,677
  4,706
  4,949
  5,204
  5,475
  5,761
  6,062
  6,379
  6,714
  7,066
  7,437
  7,828
  8,239
  8,671
  9,126
  9,605
  10,107
  10,637
  11,193
  11,778
  12,392
  13,038
  13,717
  14,430
  15,179
  15,966
  16,793
  17,662
  18,574
  19,533
Total cash flow (excl. dividends), $m
  27
  -3,588
  -3,508
  -3,664
  -3,831
  -4,011
  -4,202
  -4,406
  -4,623
  -4,853
  -5,097
  -5,355
  -5,628
  -5,916
  -6,221
  -6,543
  -6,882
  -7,239
  -7,616
  -8,012
  -8,430
  -8,870
  -9,332
  -9,819
  -10,331
  -10,870
  -11,436
  -12,031
  -12,657
  -13,315
  -14,006
Retained Cash Flow (-), $m
  -1,023
  -290
  -298
  -320
  -342
  -365
  -388
  -412
  -437
  -463
  -490
  -519
  -548
  -578
  -610
  -643
  -678
  -714
  -752
  -792
  -834
  -877
  -923
  -970
  -1,021
  -1,073
  -1,128
  -1,186
  -1,246
  -1,310
  -1,376
Prev. year cash balance distribution, $m
 
  3,035
  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
 
  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
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
 
  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
Current shareholders' claim on cash, %
  100
  96.3
  82.7
  70.9
  60.7
  51.9
  44.3
  37.8
  32.2
  27.4
  23.3
  19.8
  16.8
  14.3
  12.1
  10.2
  8.7
  7.3
  6.2
  5.2
  4.4
  3.7
  3.1
  2.6
  2.2
  1.9
  1.6
  1.3
  1.1
  0.9
  0.8

Barrick Gold Corporation engages in the exploration and development of mineral properties in the United States, Canada, Australia, Argentina, Chile, Peru, the Dominican Republic, Papua New Guinea, Tanzania, Zambia, and Saudi Arabia. It primarily explores for gold, copper, and nickel deposits. The company’s principal properties include Cortez, Goldstrike, Pueblo Viejo, Lagunas Norte, and Veladero. As of December 31, 2015, it had proven and probable gold reserves of 91.9 million ounces; and 11.7 proven and probable copper reserves of billion pounds. Barrick Gold Corporation was founded in 1983 and is headquartered in Toronto, Canada.

FINANCIAL RATIOS  of  Barrick Gold Corporation (ABX)

Valuation Ratios
P/E Ratio 34.2
Price to Sales 2.6
Price to Book 2.8
Price to Tangible Book
Price to Cash Flow 8.5
Price to Free Cash Flow 14.8
Growth Rates
Sales Growth Rate -5.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -34.3%
Cap. Spend. - 3 Yr. Gr. Rate -27.2%
Financial Strength
Quick Ratio 17
Current Ratio 0
LT Debt to Equity 98.1%
Total Debt to Equity 99.9%
Interest Coverage 4
Management Effectiveness
Return On Assets 3.5%
Ret/ On Assets - 3 Yr. Avg. -3.2%
Return On Total Capital 4%
Ret/ On T. Cap. - 3 Yr. Avg. -7.2%
Return On Equity 8.7%
Return On Equity - 3 Yr. Avg. -16.1%
Asset Turnover 0.3
Profitability Ratios
Gross Margin 40.7%
Gross Margin - 3 Yr. Avg. 34.8%
EBITDA Margin 45.2%
EBITDA Margin - 3 Yr. Avg. 11.5%
Operating Margin 28.3%
Oper. Margin - 3 Yr. Avg. -5.3%
Pre-Tax Margin 20.8%
Pre-Tax Margin - 3 Yr. Avg. -13.3%
Net Profit Margin 7.7%
Net Profit Margin - 3 Yr. Avg. -17.4%
Effective Tax Rate 51.6%
Eff/ Tax Rate - 3 Yr. Avg. 13.7%
Payout Ratio 13.1%

ABX stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ABX stock intrinsic value calculation we used $11563 million for the last fiscal year's total revenue generated by Barrick Gold Corporation. The default revenue input number comes from 2016 income statement of Barrick Gold 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 ABX stock valuation model: a) initial revenue growth rate of 3.6% 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 ABX is calculated based on our internal credit rating of Barrick Gold 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 Barrick Gold 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 ABX stock the variable cost ratio is equal to 126%.

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 ABX 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 5.7% for Barrick Gold Corporation.

Corporate tax rate of 27% is the nominal tax rate for Barrick Gold 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 ABX 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 ABX are equal to 169.9%.

Life of production assets of 10.1 years is the average useful life of capital assets used in Barrick Gold 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 ABX is equal to 9.4%. 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 - $10721 million for Barrick Gold 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 1192.65 million for Barrick Gold 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 Barrick Gold Corporation at the current share price and the inputted number of shares is $31.0 billion.


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Stock chart of ABX Financial statements of ABX
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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