Intrinsic value of Centerra Gold Inc. - CG

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$7.83

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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Previous close

$7.83

 
Intrinsic value

$27.14

 
Up/down potential

+247%

 
Rating

str. buy

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

We calculate the intrinsic value of CG 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, %
  21.95
  60.00
  54.50
  49.55
  45.10
  41.09
  37.48
  34.23
  31.31
  28.68
  26.31
  24.18
  22.26
  20.53
  18.98
  17.58
  16.32
  15.19
  14.17
  13.26
  12.43
  11.69
  11.02
  10.42
  9.87
  9.39
  8.95
  8.55
  8.20
  7.88
  7.59
Revenue, $m
  1,028
  1,645
  2,541
  3,800
  5,514
  7,780
  10,695
  14,356
  18,851
  24,256
  30,638
  38,045
  46,513
  56,064
  66,706
  78,434
  91,237
  105,098
  119,993
  135,898
  152,790
  170,646
  189,448
  209,181
  229,837
  251,412
  273,909
  297,338
  321,715
  347,061
  373,405
Variable operating expenses, $m
 
  301
  464
  693
  1,005
  1,417
  1,947
  2,613
  3,430
  4,413
  5,574
  6,919
  8,459
  10,196
  12,131
  14,264
  16,592
  19,113
  21,822
  24,714
  27,786
  31,034
  34,453
  38,042
  41,798
  45,722
  49,813
  54,074
  58,507
  63,116
  67,907
Fixed operating expenses, $m
 
  653
  669
  686
  703
  721
  739
  757
  776
  796
  815
  836
  857
  878
  900
  923
  946
  969
  994
  1,018
  1,044
  1,070
  1,097
  1,124
  1,152
  1,181
  1,210
  1,241
  1,272
  1,304
  1,336
Total operating expenses, $m
  802
  954
  1,133
  1,379
  1,708
  2,138
  2,686
  3,370
  4,206
  5,209
  6,389
  7,755
  9,316
  11,074
  13,031
  15,187
  17,538
  20,082
  22,816
  25,732
  28,830
  32,104
  35,550
  39,166
  42,950
  46,903
  51,023
  55,315
  59,779
  64,420
  69,243
Operating income, $m
  226
  691
  1,408
  2,421
  3,806
  5,642
  8,009
  10,986
  14,644
  19,047
  24,248
  30,290
  37,198
  44,990
  53,674
  63,247
  73,699
  85,015
  97,177
  110,165
  123,960
  138,542
  153,898
  170,015
  186,887
  204,509
  222,886
  242,024
  261,936
  282,641
  304,161
EBITDA, $m
  503
  1,137
  2,095
  3,449
  5,296
  7,743
  10,897
  14,862
  19,733
  25,594
  32,517
  40,555
  49,748
  60,118
  71,673
  84,410
  98,317
  113,373
  129,554
  146,833
  165,185
  184,586
  205,014
  226,456
  248,901
  272,345
  296,791
  322,251
  348,741
  376,284
  404,913
Interest expense (income), $m
  0
  20
  41
  73
  116
  176
  255
  356
  483
  640
  828
  1,049
  1,307
  1,601
  1,934
  2,304
  2,711
  3,157
  3,639
  4,156
  4,709
  5,297
  5,918
  6,571
  7,258
  7,976
  8,726
  9,508
  10,323
  11,171
  12,052
Earnings before tax, $m
  211
  671
  1,366
  2,349
  3,690
  5,466
  7,755
  10,630
  14,161
  18,408
  23,421
  29,241
  35,891
  43,389
  51,741
  60,944
  70,988
  81,859
  93,539
  106,009
  119,250
  133,245
  147,980
  163,444
  179,629
  196,533
  214,160
  232,515
  251,613
  271,470
  292,109
Tax expense, $m
  6
  181
  369
  634
  996
  1,476
  2,094
  2,870
  3,823
  4,970
  6,324
  7,895
  9,691
  11,715
  13,970
  16,455
  19,167
  22,102
  25,255
  28,622
  32,198
  35,976
  39,955
  44,130
  48,500
  53,064
  57,823
  62,779
  67,936
  73,297
  78,870
Net income, $m
  205
  490
  997
  1,714
  2,694
  3,990
  5,661
  7,760
  10,337
  13,438
  17,097
  21,346
  26,200
  31,674
  37,771
  44,489
  51,821
  59,757
  68,283
  77,386
  87,053
  97,269
  108,026
  119,314
  131,129
  143,469
  156,337
  169,736
  183,678
  198,173
  213,240

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  223
  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
  3,587
  5,375
  8,305
  12,420
  18,020
  25,424
  34,952
  46,916
  61,603
  79,269
  100,123
  124,330
  152,005
  183,217
  217,992
  256,320
  298,161
  343,457
  392,133
  444,111
  499,313
  557,666
  619,110
  683,598
  751,101
  821,608
  895,129
  971,694
  1,051,356
  1,134,186
  1,220,277
Adjusted assets (=assets-cash), $m
  3,364
  5,375
  8,305
  12,420
  18,020
  25,424
  34,952
  46,916
  61,603
  79,269
  100,123
  124,330
  152,005
  183,217
  217,992
  256,320
  298,161
  343,457
  392,133
  444,111
  499,313
  557,666
  619,110
  683,598
  751,101
  821,608
  895,129
  971,694
  1,051,356
  1,134,186
  1,220,277
Revenue / Adjusted assets
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
Average production assets, $m
  1,526
  2,441
  3,771
  5,640
  8,183
  11,545
  15,872
  21,305
  27,974
  35,996
  45,466
  56,459
  69,026
  83,199
  98,991
  116,396
  135,396
  155,965
  178,069
  201,673
  226,740
  253,238
  281,140
  310,425
  341,078
  373,095
  406,481
  441,250
  477,425
  515,039
  554,133
Working capital, $m
  1,066
  822
  1,271
  1,900
  2,757
  3,890
  5,348
  7,178
  9,425
  12,128
  15,319
  19,022
  23,257
  28,032
  33,353
  39,217
  45,619
  52,549
  59,996
  67,949
  76,395
  85,323
  94,724
  104,590
  114,918
  125,706
  136,955
  148,669
  160,857
  173,530
  186,702
Total debt, $m
  669
  1,181
  2,072
  3,323
  5,025
  7,276
  10,172
  13,809
  18,274
  23,645
  29,984
  37,343
  45,756
  55,245
  65,817
  77,468
  90,188
  103,958
  118,755
  134,557
  151,338
  169,077
  187,756
  207,361
  227,882
  249,316
  271,666
  294,942
  319,159
  344,340
  370,511
Total liabilities, $m
  1,122
  1,634
  2,525
  3,776
  5,478
  7,729
  10,625
  14,262
  18,727
  24,098
  30,437
  37,796
  46,209
  55,698
  66,270
  77,921
  90,641
  104,411
  119,208
  135,010
  151,791
  169,530
  188,209
  207,814
  228,335
  249,769
  272,119
  295,395
  319,612
  344,793
  370,964
Total equity, $m
  2,465
  3,741
  5,780
  8,644
  12,542
  17,695
  24,327
  32,653
  42,876
  55,171
  69,685
  86,533
  105,795
  127,519
  151,722
  178,399
  207,520
  239,046
  272,925
  309,101
  347,522
  388,136
  430,901
  475,784
  522,766
  571,839
  623,010
  676,299
  731,744
  789,394
  849,313
Total liabilities and equity, $m
  3,587
  5,375
  8,305
  12,420
  18,020
  25,424
  34,952
  46,915
  61,603
  79,269
  100,122
  124,329
  152,004
  183,217
  217,992
  256,320
  298,161
  343,457
  392,133
  444,111
  499,313
  557,666
  619,110
  683,598
  751,101
  821,608
  895,129
  971,694
  1,051,356
  1,134,187
  1,220,277
Debt-to-equity ratio
  0.271
  0.320
  0.360
  0.380
  0.400
  0.410
  0.420
  0.420
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.440
  0.440
  0.440
  0.440
  0.440
  0.440
  0.440
  0.440
  0.440
  0.440
  0.440
  0.440
  0.440
Adjusted equity ratio
  0.696
  0.696
  0.696
  0.696
  0.696
  0.696
  0.696
  0.696
  0.696
  0.696
  0.696
  0.696
  0.696
  0.696
  0.696
  0.696
  0.696
  0.696
  0.696
  0.696
  0.696
  0.696
  0.696
  0.696
  0.696
  0.696
  0.696
  0.696
  0.696
  0.696
  0.696

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  205
  490
  997
  1,714
  2,694
  3,990
  5,661
  7,760
  10,337
  13,438
  17,097
  21,346
  26,200
  31,674
  37,771
  44,489
  51,821
  59,757
  68,283
  77,386
  87,053
  97,269
  108,026
  119,314
  131,129
  143,469
  156,337
  169,736
  183,678
  198,173
  213,240
Depreciation, amort., depletion, $m
  277
  446
  688
  1,028
  1,490
  2,101
  2,888
  3,876
  5,088
  6,547
  8,269
  10,265
  12,550
  15,127
  17,998
  21,163
  24,618
  28,357
  32,376
  36,668
  41,225
  46,043
  51,116
  56,441
  62,014
  67,836
  73,906
  80,227
  86,805
  93,643
  100,751
Funds from operations, $m
  -131
  936
  1,685
  2,742
  4,184
  6,092
  8,549
  11,636
  15,426
  19,985
  25,366
  31,611
  38,750
  46,801
  55,769
  65,652
  76,439
  88,114
  100,660
  114,054
  128,278
  143,313
  159,142
  175,755
  193,143
  211,305
  230,242
  249,964
  270,482
  291,817
  313,991
Change in working capital, $m
  -298
  308
  448
  630
  857
  1,133
  1,458
  1,830
  2,247
  2,703
  3,191
  3,704
  4,234
  4,775
  5,321
  5,864
  6,402
  6,930
  7,447
  7,953
  8,446
  8,928
  9,401
  9,867
  10,328
  10,788
  11,249
  11,715
  12,188
  12,673
  13,172
Cash from operations, $m
  167
  1,216
  1,237
  2,112
  3,327
  4,959
  7,091
  9,805
  13,179
  17,282
  22,175
  27,907
  34,516
  42,026
  50,449
  59,788
  70,037
  81,184
  93,212
  106,102
  119,832
  134,384
  149,741
  165,888
  182,815
  200,517
  218,994
  238,249
  258,294
  279,144
  300,819
Maintenance CAPEX, $m
  0
  -277
  -444
  -686
  -1,025
  -1,488
  -2,099
  -2,886
  -3,874
  -5,086
  -6,545
  -8,267
  -10,265
  -12,550
  -15,127
  -17,998
  -21,163
  -24,618
  -28,357
  -32,376
  -36,668
  -41,225
  -46,043
  -51,116
  -56,441
  -62,014
  -67,836
  -73,906
  -80,227
  -86,805
  -93,643
New CAPEX, $m
  -293
  -915
  -1,330
  -1,869
  -2,543
  -3,362
  -4,327
  -5,433
  -6,670
  -8,022
  -9,470
  -10,992
  -12,567
  -14,174
  -15,791
  -17,405
  -19,000
  -20,569
  -22,104
  -23,603
  -25,067
  -26,498
  -27,902
  -29,284
  -30,653
  -32,017
  -33,386
  -34,769
  -36,175
  -37,614
  -39,094
Cash from investing activities, $m
  -1,114
  -1,192
  -1,774
  -2,555
  -3,568
  -4,850
  -6,426
  -8,319
  -10,544
  -13,108
  -16,015
  -19,259
  -22,832
  -26,724
  -30,918
  -35,403
  -40,163
  -45,187
  -50,461
  -55,979
  -61,735
  -67,723
  -73,945
  -80,400
  -87,094
  -94,031
  -101,222
  -108,675
  -116,402
  -124,419
  -132,737
Free cash flow, $m
  -947
  24
  -537
  -442
  -242
  109
  665
  1,487
  2,635
  4,174
  6,160
  8,648
  11,684
  15,302
  19,530
  24,384
  29,874
  35,998
  42,751
  50,122
  58,097
  66,661
  75,796
  85,487
  95,721
  106,486
  117,772
  129,575
  141,892
  154,726
  168,082
Issuance/(repayment) of debt, $m
  538
  610
  891
  1,251
  1,703
  2,251
  2,897
  3,637
  4,465
  5,370
  6,340
  7,359
  8,413
  9,488
  10,572
  11,652
  12,720
  13,770
  14,798
  15,801
  16,781
  17,739
  18,679
  19,604
  20,521
  21,434
  22,350
  23,276
  24,217
  25,180
  26,172
Issuance/(repurchase) of shares, $m
  193
  642
  1,685
  2,055
  2,437
  2,793
  3,070
  3,203
  3,122
  2,751
  2,014
  841
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  707
  1,252
  2,576
  3,306
  4,140
  5,044
  5,967
  6,840
  7,587
  8,121
  8,354
  8,200
  8,413
  9,488
  10,572
  11,652
  12,720
  13,770
  14,798
  15,801
  16,781
  17,739
  18,679
  19,604
  20,521
  21,434
  22,350
  23,276
  24,217
  25,180
  26,172
Total cash flow (excl. dividends), $m
  -240
  634
  354
  809
  1,461
  2,360
  3,562
  5,124
  7,100
  9,544
  12,500
  16,007
  20,097
  24,790
  30,102
  36,036
  42,593
  49,768
  57,548
  65,923
  74,878
  84,400
  94,475
  105,092
  116,242
  127,920
  140,122
  152,851
  166,109
  179,906
  194,253
Retained Cash Flow (-), $m
  -545
  -1,401
  -2,039
  -2,864
  -3,898
  -5,153
  -6,632
  -8,327
  -10,223
  -12,295
  -14,514
  -16,848
  -19,262
  -21,724
  -24,203
  -26,676
  -29,122
  -31,526
  -33,879
  -36,177
  -38,420
  -40,614
  -42,765
  -44,884
  -46,982
  -49,073
  -51,171
  -53,290
  -55,445
  -57,650
  -59,919
Prev. year cash balance distribution, $m
 
  125
  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
  835
  3,067
  5,898
  9,360
  13,472
  18,242
  23,670
  29,747
  36,458
  43,786
  51,710
  60,208
  69,260
  78,847
  88,952
  99,561
  110,664
  122,256
  134,334
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
  356
  1,166
  1,980
  2,748
  3,423
  3,969
  4,359
  4,580
  4,633
  4,529
  4,291
  3,946
  3,528
  3,067
  2,595
  2,137
  1,712
  1,335
  1,011
Current shareholders' claim on cash, %
  100
  77.1
  51.8
  37.4
  28.6
  23.1
  19.4
  17.0
  15.4
  14.4
  13.9
  13.7
  13.7
  13.7
  13.7
  13.7
  13.7
  13.7
  13.7
  13.7
  13.7
  13.7
  13.7
  13.7
  13.7
  13.7
  13.7
  13.7
  13.7
  13.7
  13.7

Centerra Gold Inc., a gold mining and exploration company, engages in the acquisition, exploration, development, and operation of gold properties primarily in the Kyrgyz Republic, Mongolia, Turkey, and Canada. It holds 100% interests in the Kumtor mine located in the Kyrgyz Republic; and the Boroo mine situated in Mongolia. The company also has 100% interests in development properties, such as the Öksüt project located in Turkey; and the Gatsuurt property situated in Mongolia, as well as holds interest in Greenstone Gold property in Canada. In addition, it owns 100% interest in the Altan Tsagaan Ovoo exploration property located in Mongolia. Centerra Gold Inc. was founded in 1992 and is headquartered in Toronto, Canada.

FINANCIAL RATIOS  of  Centerra Gold Inc. (CG)

Valuation Ratios
P/E Ratio 11.1
Price to Sales 2.2
Price to Book 0.9
Price to Tangible Book
Price to Cash Flow 13.7
Price to Free Cash Flow -18.1
Growth Rates
Sales Growth Rate 21.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -10.9%
Cap. Spend. - 3 Yr. Gr. Rate -6.8%
Financial Strength
Quick Ratio 2
Current Ratio 1.2
LT Debt to Equity 23.2%
Total Debt to Equity 27.1%
Interest Coverage 0
Management Effectiveness
Return On Assets 7%
Ret/ On Assets - 3 Yr. Avg. 2.3%
Return On Total Capital 8%
Ret/ On T. Cap. - 3 Yr. Avg. 2.6%
Return On Equity 9.4%
Return On Equity - 3 Yr. Avg. 3.1%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 45.5%
Gross Margin - 3 Yr. Avg. 39.4%
EBITDA Margin 47.5%
EBITDA Margin - 3 Yr. Avg. 39.6%
Operating Margin 22%
Oper. Margin - 3 Yr. Avg. 8.4%
Pre-Tax Margin 20.5%
Pre-Tax Margin - 3 Yr. Avg. 7.3%
Net Profit Margin 19.9%
Net Profit Margin - 3 Yr. Avg. 6.9%
Effective Tax Rate 2.8%
Eff/ Tax Rate - 3 Yr. Avg. -0.8%
Payout Ratio 15.1%

CG stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CG stock intrinsic value calculation we used $1028 million for the last fiscal year's total revenue generated by Centerra Gold Inc.. The default revenue input number comes from 2016 income statement of Centerra 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 CG stock valuation model: a) initial revenue growth rate of 60% 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 CG is calculated based on our internal credit rating of Centerra 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 Centerra 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 CG stock the variable cost ratio is equal to 18.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $637 million in the base year in the intrinsic value calculation for CG 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 Centerra Gold Inc..

Corporate tax rate of 27% is the nominal tax rate for Centerra 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 CG 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 CG are equal to 148.4%.

Life of production assets of 5.5 years is the average useful life of capital assets used in Centerra 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 CG is equal to 50%. 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 - $2465 million for Centerra 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 290.609 million for Centerra 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 Centerra Gold Inc. at the current share price and the inputted number of shares is $2.3 billion.


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Stock chart of CG Financial statements of CG
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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