Intrinsic value of Alamos Gold Inc. - AGI

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$10.27

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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Previous close

$10.27

 
Intrinsic value

$1.95

 
Up/down potential

-81%

 
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 AGI 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 3.1

 

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, %
  35.63
  14.70
  13.73
  12.86
  12.07
  11.36
  10.73
  10.15
  9.64
  9.18
  8.76
  8.38
  8.04
  7.74
  7.47
  7.22
  7.00
  6.80
  6.62
  6.46
  6.31
  6.18
  6.06
  5.96
  5.86
  5.77
  5.70
  5.63
  5.56
  5.51
  5.46
Revenue, $m
  651
  747
  849
  958
  1,074
  1,196
  1,324
  1,459
  1,600
  1,746
  1,899
  2,059
  2,224
  2,396
  2,575
  2,761
  2,954
  3,155
  3,364
  3,581
  3,807
  4,042
  4,287
  4,543
  4,809
  5,086
  5,376
  5,679
  5,995
  6,325
  6,670
Variable operating expenses, $m
 
  1,823
  2,074
  2,340
  2,623
  2,921
  3,234
  3,563
  3,906
  4,265
  4,638
  5,027
  5,431
  5,852
  6,289
  6,743
  7,214
  7,705
  8,215
  8,745
  9,297
  9,871
  10,470
  11,093
  11,743
  12,421
  13,129
  13,867
  14,639
  15,445
  16,288
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
  623
  1,823
  2,074
  2,340
  2,623
  2,921
  3,234
  3,563
  3,906
  4,265
  4,638
  5,027
  5,431
  5,852
  6,289
  6,743
  7,214
  7,705
  8,215
  8,745
  9,297
  9,871
  10,470
  11,093
  11,743
  12,421
  13,129
  13,867
  14,639
  15,445
  16,288
Operating income, $m
  29
  -1,077
  -1,225
  -1,382
  -1,549
  -1,725
  -1,910
  -2,104
  -2,307
  -2,518
  -2,739
  -2,968
  -3,207
  -3,455
  -3,713
  -3,981
  -4,260
  -4,550
  -4,851
  -5,164
  -5,490
  -5,829
  -6,182
  -6,550
  -6,934
  -7,335
  -7,752
  -8,189
  -8,644
  -9,120
  -9,618
EBITDA, $m
  190
  -892
  -1,014
  -1,144
  -1,282
  -1,428
  -1,581
  -1,742
  -1,910
  -2,085
  -2,268
  -2,458
  -2,656
  -2,861
  -3,075
  -3,297
  -3,527
  -3,767
  -4,016
  -4,276
  -4,545
  -4,826
  -5,119
  -5,424
  -5,741
  -6,073
  -6,419
  -6,780
  -7,157
  -7,552
  -7,964
Interest expense (income), $m
  0
  14
  19
  25
  31
  37
  43
  50
  57
  65
  72
  81
  89
  98
  107
  116
  126
  137
  147
  158
  170
  182
  194
  207
  221
  235
  250
  265
  281
  298
  315
Earnings before tax, $m
  -10
  -1,091
  -1,244
  -1,407
  -1,579
  -1,762
  -1,953
  -2,154
  -2,364
  -2,583
  -2,811
  -3,049
  -3,296
  -3,553
  -3,820
  -4,098
  -4,386
  -4,686
  -4,998
  -5,322
  -5,660
  -6,011
  -6,377
  -6,758
  -7,155
  -7,570
  -8,002
  -8,454
  -8,925
  -9,418
  -9,933
Tax expense, $m
  14
  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
  -24
  -1,091
  -1,244
  -1,407
  -1,579
  -1,762
  -1,953
  -2,154
  -2,364
  -2,583
  -2,811
  -3,049
  -3,296
  -3,553
  -3,820
  -4,098
  -4,386
  -4,686
  -4,998
  -5,322
  -5,660
  -6,011
  -6,377
  -6,758
  -7,155
  -7,570
  -8,002
  -8,454
  -8,925
  -9,418
  -9,933

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  341
  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
  3,367
  3,473
  3,950
  4,458
  4,996
  5,564
  6,160
  6,786
  7,440
  8,123
  8,834
  9,575
  10,345
  11,145
  11,978
  12,842
  13,741
  14,675
  15,646
  16,656
  17,707
  18,801
  19,941
  21,128
  22,366
  23,658
  25,005
  26,412
  27,882
  29,418
  31,023
Adjusted assets (=assets-cash), $m
  3,026
  3,473
  3,950
  4,458
  4,996
  5,564
  6,160
  6,786
  7,440
  8,123
  8,834
  9,575
  10,345
  11,145
  11,978
  12,842
  13,741
  14,675
  15,646
  16,656
  17,707
  18,801
  19,941
  21,128
  22,366
  23,658
  25,005
  26,412
  27,882
  29,418
  31,023
Revenue / Adjusted assets
  0.215
  0.215
  0.215
  0.215
  0.215
  0.215
  0.215
  0.215
  0.215
  0.215
  0.215
  0.215
  0.215
  0.215
  0.215
  0.215
  0.215
  0.215
  0.215
  0.215
  0.215
  0.215
  0.215
  0.215
  0.215
  0.215
  0.215
  0.215
  0.215
  0.215
  0.215
Average production assets, $m
  2,552
  2,926
  3,328
  3,756
  4,209
  4,688
  5,191
  5,718
  6,269
  6,844
  7,443
  8,067
  8,716
  9,391
  10,092
  10,821
  11,578
  12,365
  13,183
  14,034
  14,920
  15,842
  16,802
  17,802
  18,846
  19,934
  21,069
  22,255
  23,493
  24,787
  26,139
Working capital, $m
  479
  164
  187
  211
  236
  263
  291
  321
  352
  384
  418
  453
  489
  527
  567
  607
  650
  694
  740
  788
  838
  889
  943
  999
  1,058
  1,119
  1,183
  1,249
  1,319
  1,391
  1,467
Total debt, $m
  412
  554
  710
  875
  1,051
  1,236
  1,430
  1,634
  1,847
  2,070
  2,302
  2,543
  2,794
  3,055
  3,327
  3,609
  3,901
  4,206
  4,523
  4,852
  5,194
  5,551
  5,923
  6,310
  6,713
  7,134
  7,574
  8,032
  8,512
  9,012
  9,535
Total liabilities, $m
  990
  1,132
  1,288
  1,453
  1,629
  1,814
  2,008
  2,212
  2,425
  2,648
  2,880
  3,121
  3,372
  3,633
  3,905
  4,187
  4,479
  4,784
  5,101
  5,430
  5,772
  6,129
  6,501
  6,888
  7,291
  7,712
  8,152
  8,610
  9,090
  9,590
  10,113
Total equity, $m
  2,377
  2,341
  2,662
  3,004
  3,367
  3,750
  4,152
  4,574
  5,015
  5,475
  5,954
  6,453
  6,972
  7,512
  8,073
  8,656
  9,261
  9,891
  10,545
  11,226
  11,935
  12,672
  13,440
  14,241
  15,075
  15,945
  16,854
  17,802
  18,792
  19,827
  20,909
Total liabilities and equity, $m
  3,367
  3,473
  3,950
  4,457
  4,996
  5,564
  6,160
  6,786
  7,440
  8,123
  8,834
  9,574
  10,344
  11,145
  11,978
  12,843
  13,740
  14,675
  15,646
  16,656
  17,707
  18,801
  19,941
  21,129
  22,366
  23,657
  25,006
  26,412
  27,882
  29,417
  31,022
Debt-to-equity ratio
  0.173
  0.240
  0.270
  0.290
  0.310
  0.330
  0.340
  0.360
  0.370
  0.380
  0.390
  0.390
  0.400
  0.410
  0.410
  0.420
  0.420
  0.430
  0.430
  0.430
  0.440
  0.440
  0.440
  0.440
  0.450
  0.450
  0.450
  0.450
  0.450
  0.450
  0.460
Adjusted equity ratio
  0.673
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674
  0.674

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -24
  -1,091
  -1,244
  -1,407
  -1,579
  -1,762
  -1,953
  -2,154
  -2,364
  -2,583
  -2,811
  -3,049
  -3,296
  -3,553
  -3,820
  -4,098
  -4,386
  -4,686
  -4,998
  -5,322
  -5,660
  -6,011
  -6,377
  -6,758
  -7,155
  -7,570
  -8,002
  -8,454
  -8,925
  -9,418
  -9,933
Depreciation, amort., depletion, $m
  161
  185
  211
  238
  266
  297
  329
  362
  397
  433
  471
  511
  552
  594
  639
  685
  733
  783
  834
  888
  944
  1,003
  1,063
  1,127
  1,193
  1,262
  1,333
  1,409
  1,487
  1,569
  1,654
Funds from operations, $m
  166
  -906
  -1,033
  -1,169
  -1,313
  -1,465
  -1,625
  -1,792
  -1,967
  -2,150
  -2,340
  -2,538
  -2,745
  -2,959
  -3,182
  -3,413
  -3,654
  -3,904
  -4,164
  -4,434
  -4,715
  -5,008
  -5,313
  -5,631
  -5,962
  -6,308
  -6,669
  -7,045
  -7,438
  -7,849
  -8,279
Change in working capital, $m
  -17
  21
  23
  24
  25
  27
  28
  30
  31
  32
  34
  35
  36
  38
  39
  41
  43
  44
  46
  48
  50
  52
  54
  56
  59
  61
  64
  67
  70
  73
  76
Cash from operations, $m
  183
  -887
  -1,056
  -1,193
  -1,339
  -1,492
  -1,653
  -1,822
  -1,998
  -2,182
  -2,374
  -2,573
  -2,781
  -2,997
  -3,221
  -3,454
  -3,696
  -3,948
  -4,209
  -4,482
  -4,765
  -5,060
  -5,367
  -5,687
  -6,021
  -6,369
  -6,732
  -7,112
  -7,508
  -7,922
  -8,355
Maintenance CAPEX, $m
  0
  -161
  -185
  -211
  -238
  -266
  -297
  -329
  -362
  -397
  -433
  -471
  -511
  -552
  -594
  -639
  -685
  -733
  -783
  -834
  -888
  -944
  -1,003
  -1,063
  -1,127
  -1,193
  -1,262
  -1,333
  -1,409
  -1,487
  -1,569
New CAPEX, $m
  -198
  -375
  -402
  -428
  -453
  -478
  -503
  -527
  -551
  -575
  -599
  -624
  -649
  -675
  -701
  -729
  -757
  -787
  -818
  -851
  -886
  -922
  -960
  -1,001
  -1,043
  -1,088
  -1,135
  -1,186
  -1,238
  -1,294
  -1,353
Cash from investing activities, $m
  -205
  -536
  -587
  -639
  -691
  -744
  -800
  -856
  -913
  -972
  -1,032
  -1,095
  -1,160
  -1,227
  -1,295
  -1,368
  -1,442
  -1,520
  -1,601
  -1,685
  -1,774
  -1,866
  -1,963
  -2,064
  -2,170
  -2,281
  -2,397
  -2,519
  -2,647
  -2,781
  -2,922
Free cash flow, $m
  -22
  -1,424
  -1,643
  -1,832
  -2,030
  -2,237
  -2,452
  -2,677
  -2,911
  -3,154
  -3,406
  -3,668
  -3,941
  -4,223
  -4,516
  -4,821
  -5,138
  -5,468
  -5,810
  -6,167
  -6,539
  -6,926
  -7,330
  -7,751
  -8,191
  -8,650
  -9,130
  -9,631
  -10,155
  -10,703
  -11,276
Issuance/(repayment) of debt, $m
  -13
  147
  155
  166
  175
  185
  195
  204
  213
  223
  232
  241
  251
  261
  271
  282
  293
  304
  317
  329
  343
  357
  372
  387
  404
  421
  439
  459
  479
  501
  523
Issuance/(repurchase) of shares, $m
  10
  1,240
  1,809
  2,008
  2,217
  2,434
  2,660
  2,895
  3,139
  3,392
  3,654
  3,926
  4,209
  4,502
  4,806
  5,122
  5,451
  5,793
  6,148
  6,519
  6,905
  7,307
  7,726
  8,164
  8,622
  9,099
  9,598
  10,120
  10,666
  11,237
  11,835
Cash from financing (excl. dividends), $m  
  -10
  1,387
  1,964
  2,174
  2,392
  2,619
  2,855
  3,099
  3,352
  3,615
  3,886
  4,167
  4,460
  4,763
  5,077
  5,404
  5,744
  6,097
  6,465
  6,848
  7,248
  7,664
  8,098
  8,551
  9,026
  9,520
  10,037
  10,579
  11,145
  11,738
  12,358
Total cash flow (excl. dividends), $m
  -34
  -1,276
  -1,487
  -1,666
  -1,854
  -2,051
  -2,258
  -2,473
  -2,698
  -2,931
  -3,174
  -3,427
  -3,689
  -3,962
  -4,245
  -4,539
  -4,845
  -5,163
  -5,494
  -5,838
  -6,196
  -6,569
  -6,958
  -7,364
  -7,787
  -8,229
  -8,690
  -9,172
  -9,676
  -10,202
  -10,753
Retained Cash Flow (-), $m
  -47
  -300
  -321
  -342
  -363
  -383
  -402
  -422
  -441
  -460
  -479
  -499
  -519
  -540
  -561
  -583
  -606
  -630
  -655
  -681
  -708
  -737
  -768
  -800
  -834
  -870
  -908
  -948
  -991
  -1,035
  -1,082
Prev. year cash balance distribution, $m
 
  336
  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
  68.4
  43.1
  27.4
  17.6
  11.3
  7.4
  4.8
  3.2
  2.1
  1.4
  0.9
  0.6
  0.4
  0.3
  0.2
  0.1
  0.1
  0.1
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0

Alamos Gold Inc. explores for, mines, develops, and produces gold deposits in the United States and Canada. The company also explores for silver and precious metals. Its principal assets include the Young-Davidson mine, which includes mineral leases and claims totaling 11,000 acres located in Northern Ontario, Canada; the Mulatos mine in the Salamandra concessions; and the El Chanate mine that comprises 22 mineral concessions covering 4,618 hectares situated in the State of Sonora, Mexico. The company also holds interest in a portfolio of development stage projects in Mexico, Turkey, Canada, and the United States. The company was formerly known as AuRico Gold Inc. and changed its name to Alamos Gold, Inc. in July 2015. Alamos Gold, Inc. is headquartered in Toronto, Canada.

FINANCIAL RATIOS  of  Alamos Gold Inc. (AGI)

Valuation Ratios
P/E Ratio -114.3
Price to Sales 4.2
Price to Book 1.2
Price to Tangible Book
Price to Cash Flow 15
Price to Free Cash Flow -182.9
Growth Rates
Sales Growth Rate 35.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -10%
Cap. Spend. - 3 Yr. Gr. Rate -10.1%
Financial Strength
Quick Ratio 68
Current Ratio 0.1
LT Debt to Equity 17.1%
Total Debt to Equity 17.3%
Interest Coverage 0
Management Effectiveness
Return On Assets -0.7%
Ret/ On Assets - 3 Yr. Avg. -9.8%
Return On Total Capital -0.9%
Ret/ On T. Cap. - 3 Yr. Avg. -11.6%
Return On Equity -1%
Return On Equity - 3 Yr. Avg. -13.8%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 35.6%
Gross Margin - 3 Yr. Avg. 30.7%
EBITDA Margin 23.2%
EBITDA Margin - 3 Yr. Avg. -42.5%
Operating Margin 4.3%
Oper. Margin - 3 Yr. Avg. -63.7%
Pre-Tax Margin -1.5%
Pre-Tax Margin - 3 Yr. Avg. -75.8%
Net Profit Margin -3.7%
Net Profit Margin - 3 Yr. Avg. -68.6%
Effective Tax Rate -140%
Eff/ Tax Rate - 3 Yr. Avg. -38.9%
Payout Ratio -29.2%

AGI stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the AGI stock intrinsic value calculation we used $651 million for the last fiscal year's total revenue generated by Alamos Gold Inc.. The default revenue input number comes from 2016 income statement of Alamos Gold Inc.. 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 AGI stock valuation model: a) initial revenue growth rate of 14.7% 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 AGI is calculated based on our internal credit rating of Alamos Gold Inc., 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 Alamos Gold Inc..
    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 AGI stock the variable cost ratio is equal to 244.2%.

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 AGI 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 Alamos Gold Inc..

Corporate tax rate of 27% is the nominal tax rate for Alamos Gold Inc.. 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 AGI 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 AGI are equal to 391.9%.

Life of production assets of 15.8 years is the average useful life of capital assets used in Alamos Gold Inc. 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 AGI is equal to 22%. 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 - $2377 million for Alamos Gold Inc. - 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 304.587 million for Alamos Gold Inc. 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 Alamos Gold Inc. at the current share price and the inputted number of shares is $3.1 billion.


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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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