Intrinsic value of Barrick Gold Corporation - ABX

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$22.07

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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Previous close

$22.07

 
Intrinsic value

$1.94

 
Up/down potential

-91%

 
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 25.2

 

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
  3.30
  3.47
  3.62
  3.76
  3.88
  4.00
  4.10
  4.19
  4.27
  4.34
  4.41
  4.47
  4.52
  4.57
  4.61
  4.65
  4.68
  4.72
  4.74
  4.77
  4.79
  4.81
  4.83
  4.85
  4.86
  4.88
  4.89
  4.90
  4.91
  4.92
Revenue, $m
  11,563
  11,945
  12,359
  12,807
  13,288
  13,805
  14,356
  14,944
  15,570
  16,235
  16,940
  17,686
  18,476
  19,311
  20,193
  21,124
  22,107
  23,142
  24,234
  25,384
  26,595
  27,869
  29,211
  30,623
  32,108
  33,669
  35,312
  37,039
  38,854
  40,762
  42,768
Variable operating expenses, $m
 
  15,044
  15,560
  16,117
  16,716
  17,358
  18,044
  18,776
  19,554
  20,381
  21,258
  22,001
  22,984
  24,023
  25,120
  26,278
  27,500
  28,789
  30,146
  31,577
  33,083
  34,669
  36,338
  38,094
  39,941
  41,884
  43,927
  46,075
  48,334
  50,707
  53,202
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
  15,044
  15,560
  16,117
  16,716
  17,358
  18,044
  18,776
  19,554
  20,381
  21,258
  22,001
  22,984
  24,023
  25,120
  26,278
  27,500
  28,789
  30,146
  31,577
  33,083
  34,669
  36,338
  38,094
  39,941
  41,884
  43,927
  46,075
  48,334
  50,707
  53,202
Operating income, $m
  3,275
  -3,099
  -3,201
  -3,310
  -3,427
  -3,553
  -3,688
  -3,831
  -3,984
  -4,146
  -4,318
  -4,315
  -4,508
  -4,712
  -4,927
  -5,154
  -5,394
  -5,646
  -5,913
  -6,193
  -6,489
  -6,800
  -7,127
  -7,471
  -7,834
  -8,215
  -8,616
  -9,037
  -9,480
  -9,945
  -10,435
EBITDA, $m
  5,402
  -905
  -936
  -970
  -1,007
  -1,046
  -1,088
  -1,132
  -1,180
  -1,230
  -1,283
  -1,340
  -1,400
  -1,463
  -1,530
  -1,600
  -1,675
  -1,753
  -1,836
  -1,923
  -2,015
  -2,112
  -2,213
  -2,320
  -2,433
  -2,551
  -2,675
  -2,806
  -2,944
  -3,088
  -3,240
Interest expense (income), $m
  693
  600
  643
  691
  742
  797
  856
  919
  987
  1,058
  1,134
  1,215
  1,301
  1,391
  1,487
  1,587
  1,694
  1,806
  1,925
  2,050
  2,182
  2,320
  2,466
  2,620
  2,781
  2,951
  3,130
  3,318
  3,516
  3,723
  3,942
Earnings before tax, $m
  2,402
  -3,699
  -3,844
  -4,001
  -4,169
  -4,350
  -4,544
  -4,751
  -4,971
  -5,205
  -5,453
  -5,530
  -5,808
  -6,103
  -6,413
  -6,741
  -7,088
  -7,453
  -7,838
  -8,243
  -8,670
  -9,120
  -9,593
  -10,091
  -10,615
  -11,166
  -11,745
  -12,355
  -12,995
  -13,669
  -14,376
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
  -3,699
  -3,844
  -4,001
  -4,169
  -4,350
  -4,544
  -4,751
  -4,971
  -5,205
  -5,453
  -5,530
  -5,808
  -6,103
  -6,413
  -6,741
  -7,088
  -7,453
  -7,838
  -8,243
  -8,670
  -9,120
  -9,593
  -10,091
  -10,615
  -11,166
  -11,745
  -12,355
  -12,995
  -13,669
  -14,376

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
  31,937
  33,046
  34,243
  35,531
  36,911
  38,386
  39,958
  41,631
  43,408
  45,293
  47,289
  49,401
  51,634
  53,993
  56,482
  59,109
  61,878
  64,796
  67,871
  71,109
  74,517
  78,104
  81,879
  85,849
  90,025
  94,417
  99,034
  103,888
  108,990
  114,352
Adjusted assets (=assets-cash), $m
  30,906
  31,937
  33,046
  34,243
  35,531
  36,911
  38,386
  39,958
  41,631
  43,408
  45,293
  47,289
  49,401
  51,634
  53,993
  56,482
  59,109
  61,878
  64,796
  67,871
  71,109
  74,517
  78,104
  81,879
  85,849
  90,025
  94,417
  99,034
  103,888
  108,990
  114,352
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
  20,294
  20,998
  21,759
  22,577
  23,454
  24,391
  25,391
  26,454
  27,583
  28,780
  30,049
  31,391
  32,810
  34,308
  35,890
  37,559
  39,319
  41,173
  43,127
  45,184
  47,350
  49,629
  52,028
  54,551
  57,204
  59,995
  62,929
  66,013
  69,255
  72,662
Working capital, $m
  4,127
  1,123
  1,162
  1,204
  1,249
  1,298
  1,349
  1,405
  1,464
  1,526
  1,592
  1,662
  1,737
  1,815
  1,898
  1,986
  2,078
  2,175
  2,278
  2,386
  2,500
  2,620
  2,746
  2,879
  3,018
  3,165
  3,319
  3,482
  3,652
  3,832
  4,020
Total debt, $m
  10,715
  11,287
  12,119
  13,018
  13,985
  15,022
  16,130
  17,311
  18,567
  19,902
  21,317
  22,816
  24,402
  26,079
  27,850
  29,720
  31,693
  33,772
  35,964
  38,273
  40,705
  43,264
  45,958
  48,793
  51,775
  54,911
  58,209
  61,676
  65,322
  69,153
  73,180
Total liabilities, $m
  23,413
  23,985
  24,817
  25,716
  26,683
  27,720
  28,828
  30,009
  31,265
  32,600
  34,015
  35,514
  37,100
  38,777
  40,548
  42,418
  44,391
  46,470
  48,662
  50,971
  53,403
  55,962
  58,656
  61,491
  64,473
  67,609
  70,907
  74,374
  78,020
  81,851
  85,878
Total equity, $m
  10,721
  7,952
  8,228
  8,526
  8,847
  9,191
  9,558
  9,950
  10,366
  10,809
  11,278
  11,775
  12,301
  12,857
  13,444
  14,064
  14,718
  15,408
  16,134
  16,900
  17,706
  18,555
  19,448
  20,388
  21,376
  22,416
  23,510
  24,659
  25,868
  27,138
  28,474
Total liabilities and equity, $m
  34,134
  31,937
  33,045
  34,242
  35,530
  36,911
  38,386
  39,959
  41,631
  43,409
  45,293
  47,289
  49,401
  51,634
  53,992
  56,482
  59,109
  61,878
  64,796
  67,871
  71,109
  74,517
  78,104
  81,879
  85,849
  90,025
  94,417
  99,033
  103,888
  108,989
  114,352
Debt-to-equity ratio
  0.999
  1.420
  1.470
  1.530
  1.580
  1.630
  1.690
  1.740
  1.790
  1.840
  1.890
  1.940
  1.980
  2.030
  2.070
  2.110
  2.150
  2.190
  2.230
  2.260
  2.300
  2.330
  2.360
  2.390
  2.420
  2.450
  2.480
  2.500
  2.530
  2.550
  2.570
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
  -3,699
  -3,844
  -4,001
  -4,169
  -4,350
  -4,544
  -4,751
  -4,971
  -5,205
  -5,453
  -5,530
  -5,808
  -6,103
  -6,413
  -6,741
  -7,088
  -7,453
  -7,838
  -8,243
  -8,670
  -9,120
  -9,593
  -10,091
  -10,615
  -11,166
  -11,745
  -12,355
  -12,995
  -13,669
  -14,376
Depreciation, amort., depletion, $m
  2,127
  2,194
  2,264
  2,340
  2,421
  2,507
  2,600
  2,699
  2,804
  2,916
  3,035
  2,975
  3,108
  3,248
  3,397
  3,553
  3,719
  3,893
  4,077
  4,270
  4,474
  4,688
  4,914
  5,151
  5,401
  5,664
  5,940
  6,231
  6,536
  6,857
  7,194
Funds from operations, $m
  1,217
  -1,505
  -1,580
  -1,661
  -1,749
  -1,843
  -1,944
  -2,052
  -2,166
  -2,288
  -2,418
  -2,555
  -2,700
  -2,854
  -3,016
  -3,188
  -3,369
  -3,560
  -3,761
  -3,973
  -4,197
  -4,432
  -4,679
  -4,940
  -5,214
  -5,502
  -5,805
  -6,124
  -6,459
  -6,812
  -7,182
Change in working capital, $m
  -2,350
  36
  39
  42
  45
  49
  52
  55
  59
  62
  66
  70
  74
  78
  83
  88
  92
  97
  103
  108
  114
  120
  126
  133
  140
  147
  154
  162
  171
  179
  189
Cash from operations, $m
  3,567
  -1,764
  -1,619
  -1,703
  -1,794
  -1,892
  -1,996
  -2,107
  -2,225
  -2,351
  -2,484
  -2,625
  -2,775
  -2,933
  -3,099
  -3,276
  -3,461
  -3,657
  -3,864
  -4,081
  -4,310
  -4,552
  -4,805
  -5,072
  -5,353
  -5,649
  -5,960
  -6,286
  -6,630
  -6,991
  -7,371
Maintenance CAPEX, $m
  0
  -1,945
  -2,009
  -2,079
  -2,154
  -2,235
  -2,322
  -2,415
  -2,514
  -2,619
  -2,731
  -2,850
  -2,975
  -3,108
  -3,248
  -3,397
  -3,553
  -3,719
  -3,893
  -4,077
  -4,270
  -4,474
  -4,688
  -4,914
  -5,151
  -5,401
  -5,664
  -5,940
  -6,231
  -6,536
  -6,857
New CAPEX, $m
  -1,521
  -649
  -704
  -761
  -818
  -877
  -937
  -999
  -1,063
  -1,129
  -1,197
  -1,268
  -1,342
  -1,419
  -1,499
  -1,582
  -1,669
  -1,760
  -1,854
  -1,954
  -2,057
  -2,166
  -2,279
  -2,398
  -2,523
  -2,654
  -2,790
  -2,934
  -3,084
  -3,242
  -3,407
Cash from investing activities, $m
  -557
  -2,594
  -2,713
  -2,840
  -2,972
  -3,112
  -3,259
  -3,414
  -3,577
  -3,748
  -3,928
  -4,118
  -4,317
  -4,527
  -4,747
  -4,979
  -5,222
  -5,479
  -5,747
  -6,031
  -6,327
  -6,640
  -6,967
  -7,312
  -7,674
  -8,055
  -8,454
  -8,874
  -9,315
  -9,778
  -10,264
Free cash flow, $m
  3,010
  -4,357
  -4,332
  -4,543
  -4,767
  -5,004
  -5,255
  -5,521
  -5,802
  -6,099
  -6,413
  -6,743
  -7,092
  -7,459
  -7,847
  -8,254
  -8,684
  -9,136
  -9,611
  -10,111
  -10,638
  -11,191
  -11,773
  -12,385
  -13,028
  -13,704
  -14,414
  -15,160
  -15,945
  -16,769
  -17,635
Issuance/(repayment) of debt, $m
  -2,779
  765
  832
  899
  967
  1,037
  1,108
  1,181
  1,256
  1,334
  1,415
  1,499
  1,586
  1,677
  1,771
  1,870
  1,972
  2,080
  2,192
  2,309
  2,431
  2,560
  2,694
  2,835
  2,982
  3,136
  3,298
  3,467
  3,645
  3,832
  4,027
Issuance/(repurchase) of shares, $m
  0
  824
  3,776
  3,942
  4,120
  4,311
  4,515
  4,732
  4,962
  5,207
  5,466
  5,741
  6,032
  6,338
  6,663
  7,005
  7,365
  7,745
  8,146
  8,568
  9,012
  9,480
  9,972
  10,490
  11,034
  11,607
  12,209
  12,843
  13,508
  14,208
  14,943
Cash from financing (excl. dividends), $m  
  -2,987
  1,589
  4,608
  4,841
  5,087
  5,348
  5,623
  5,913
  6,218
  6,541
  6,881
  7,240
  7,618
  8,015
  8,434
  8,875
  9,337
  9,825
  10,338
  10,877
  11,443
  12,040
  12,666
  13,325
  14,016
  14,743
  15,507
  16,310
  17,153
  18,040
  18,970
Total cash flow (excl. dividends), $m
  27
  -3,593
  -3,500
  -3,644
  -3,800
  -3,967
  -4,148
  -4,340
  -4,546
  -4,765
  -4,997
  -5,244
  -5,506
  -5,782
  -6,075
  -6,385
  -6,711
  -7,056
  -7,419
  -7,802
  -8,206
  -8,631
  -9,079
  -9,550
  -10,046
  -10,567
  -11,116
  -11,693
  -12,300
  -12,937
  -13,608
Retained Cash Flow (-), $m
  -1,023
  -266
  -276
  -298
  -321
  -344
  -367
  -392
  -417
  -442
  -469
  -497
  -526
  -556
  -587
  -620
  -654
  -690
  -727
  -766
  -806
  -849
  -893
  -940
  -989
  -1,040
  -1,093
  -1,150
  -1,209
  -1,270
  -1,335
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
  95.6
  79.5
  66.1
  54.8
  45.4
  37.5
  31.0
  25.6
  21.1
  17.3
  14.2
  11.7
  9.6
  7.9
  6.4
  5.3
  4.3
  3.5
  2.9
  2.3
  1.9
  1.5
  1.3
  1.0
  0.8
  0.7
  0.5
  0.4
  0.4
  0.3

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 29.1
Price to Sales 2.2
Price to Book 2.4
Price to Tangible Book
Price to Cash Flow 7.2
Price to Free Cash Flow 12.6
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 3.3% 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 1140.71 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 $25.2 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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