Intrinsic value of Detour Gold Corporation - DGC

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$15.18

  Intrinsic Value

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  Value-price divergence*

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

We calculate the intrinsic value of DGC 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 2.6

 

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, %
  16.82
  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
  889
  907
  928
  951
  978
  1,008
  1,040
  1,076
  1,114
  1,156
  1,200
  1,247
  1,298
  1,352
  1,409
  1,470
  1,534
  1,603
  1,675
  1,751
  1,831
  1,916
  2,006
  2,100
  2,199
  2,304
  2,414
  2,530
  2,653
  2,781
  2,916
Variable operating expenses, $m
 
  188
  192
  197
  202
  209
  215
  223
  231
  239
  248
  258
  269
  280
  292
  304
  318
  332
  347
  362
  379
  397
  415
  435
  455
  477
  500
  524
  549
  576
  604
Fixed operating expenses, $m
 
  662
  679
  696
  713
  731
  749
  768
  787
  807
  827
  848
  869
  891
  913
  936
  959
  983
  1,008
  1,033
  1,059
  1,085
  1,112
  1,140
  1,168
  1,198
  1,228
  1,258
  1,290
  1,322
  1,355
Total operating expenses, $m
  814
  850
  871
  893
  915
  940
  964
  991
  1,018
  1,046
  1,075
  1,106
  1,138
  1,171
  1,205
  1,240
  1,277
  1,315
  1,355
  1,395
  1,438
  1,482
  1,527
  1,575
  1,623
  1,675
  1,728
  1,782
  1,839
  1,898
  1,959
Operating income, $m
  76
  57
  57
  59
  63
  68
  76
  85
  96
  110
  125
  142
  160
  182
  205
  230
  258
  288
  320
  356
  394
  435
  478
  525
  576
  630
  687
  748
  814
  883
  957
EBITDA, $m
  300
  285
  290
  298
  309
  322
  338
  356
  377
  400
  427
  456
  487
  522
  559
  600
  644
  691
  742
  796
  855
  917
  983
  1,054
  1,129
  1,210
  1,295
  1,385
  1,481
  1,583
  1,692
Interest expense (income), $m
  34
  18
  18
  19
  20
  21
  22
  23
  25
  26
  28
  29
  31
  33
  35
  37
  40
  42
  45
  47
  50
  53
  56
  60
  63
  67
  71
  75
  80
  84
  89
Earnings before tax, $m
  -33
  39
  39
  40
  43
  47
  54
  62
  72
  83
  97
  112
  129
  148
  170
  193
  218
  246
  276
  308
  344
  381
  422
  466
  512
  563
  616
  673
  734
  799
  869
Tax expense, $m
  -24
  11
  10
  11
  12
  13
  15
  17
  19
  23
  26
  30
  35
  40
  46
  52
  59
  66
  75
  83
  93
  103
  114
  126
  138
  152
  166
  182
  198
  216
  234
Net income, $m
  -9
  29
  28
  29
  31
  35
  39
  45
  52
  61
  71
  82
  94
  108
  124
  141
  159
  180
  201
  225
  251
  278
  308
  340
  374
  411
  450
  491
  536
  583
  634

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  175
  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
  3,202
  3,084
  3,155
  3,236
  3,327
  3,428
  3,539
  3,659
  3,790
  3,930
  4,081
  4,243
  4,415
  4,598
  4,793
  5,000
  5,219
  5,451
  5,696
  5,955
  6,229
  6,518
  6,822
  7,143
  7,481
  7,837
  8,212
  8,607
  9,022
  9,459
  9,919
Adjusted assets (=assets-cash), $m
  3,027
  3,084
  3,155
  3,236
  3,327
  3,428
  3,539
  3,659
  3,790
  3,930
  4,081
  4,243
  4,415
  4,598
  4,793
  5,000
  5,219
  5,451
  5,696
  5,955
  6,229
  6,518
  6,822
  7,143
  7,481
  7,837
  8,212
  8,607
  9,022
  9,459
  9,919
Revenue / Adjusted assets
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
  0.294
Average production assets, $m
  2,864
  2,922
  2,989
  3,066
  3,152
  3,247
  3,352
  3,466
  3,590
  3,723
  3,866
  4,019
  4,182
  4,356
  4,540
  4,736
  4,944
  5,163
  5,396
  5,641
  5,900
  6,174
  6,462
  6,766
  7,087
  7,424
  7,779
  8,153
  8,547
  8,961
  9,396
Working capital, $m
  -214
  56
  58
  59
  61
  62
  65
  67
  69
  72
  74
  77
  80
  84
  87
  91
  95
  99
  104
  109
  114
  119
  124
  130
  136
  143
  150
  157
  164
  172
  181
Total debt, $m
  444
  277
  289
  303
  318
  335
  354
  374
  396
  419
  445
  472
  501
  531
  564
  599
  636
  675
  716
  759
  805
  854
  905
  959
  1,016
  1,076
  1,139
  1,205
  1,275
  1,348
  1,425
Total liabilities, $m
  685
  518
  530
  544
  559
  576
  595
  615
  637
  660
  686
  713
  742
  772
  805
  840
  877
  916
  957
  1,000
  1,046
  1,095
  1,146
  1,200
  1,257
  1,317
  1,380
  1,446
  1,516
  1,589
  1,666
Total equity, $m
  2,517
  2,566
  2,625
  2,693
  2,768
  2,852
  2,944
  3,045
  3,153
  3,270
  3,396
  3,530
  3,673
  3,826
  3,988
  4,160
  4,342
  4,535
  4,739
  4,955
  5,182
  5,423
  5,676
  5,943
  6,224
  6,521
  6,833
  7,161
  7,507
  7,870
  8,253
Total liabilities and equity, $m
  3,202
  3,084
  3,155
  3,237
  3,327
  3,428
  3,539
  3,660
  3,790
  3,930
  4,082
  4,243
  4,415
  4,598
  4,793
  5,000
  5,219
  5,451
  5,696
  5,955
  6,228
  6,518
  6,822
  7,143
  7,481
  7,838
  8,213
  8,607
  9,023
  9,459
  9,919
Debt-to-equity ratio
  0.176
  0.110
  0.110
  0.110
  0.110
  0.120
  0.120
  0.120
  0.130
  0.130
  0.130
  0.130
  0.140
  0.140
  0.140
  0.140
  0.150
  0.150
  0.150
  0.150
  0.160
  0.160
  0.160
  0.160
  0.160
  0.160
  0.170
  0.170
  0.170
  0.170
  0.170
Adjusted equity ratio
  0.774
  0.832
  0.832
  0.832
  0.832
  0.832
  0.832
  0.832
  0.832
  0.832
  0.832
  0.832
  0.832
  0.832
  0.832
  0.832
  0.832
  0.832
  0.832
  0.832
  0.832
  0.832
  0.832
  0.832
  0.832
  0.832
  0.832
  0.832
  0.832
  0.832
  0.832

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -9
  29
  28
  29
  31
  35
  39
  45
  52
  61
  71
  82
  94
  108
  124
  141
  159
  180
  201
  225
  251
  278
  308
  340
  374
  411
  450
  491
  536
  583
  634
Depreciation, amort., depletion, $m
  224
  228
  234
  240
  246
  254
  262
  271
  280
  291
  302
  314
  327
  340
  355
  370
  386
  403
  422
  441
  461
  482
  505
  529
  554
  580
  608
  637
  668
  700
  734
Funds from operations, $m
  241
  257
  262
  269
  277
  288
  301
  316
  333
  352
  373
  396
  421
  449
  479
  511
  546
  583
  623
  666
  712
  761
  813
  869
  928
  991
  1,057
  1,128
  1,204
  1,283
  1,368
Change in working capital, $m
  -25
  1
  1
  1
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  6
  6
  6
  6
  7
  7
  8
  8
  8
Cash from operations, $m
  266
  208
  260
  267
  276
  286
  299
  314
  331
  349
  370
  393
  418
  445
  475
  507
  542
  579
  618
  661
  707
  755
  807
  863
  922
  984
  1,051
  1,121
  1,196
  1,276
  1,360
Maintenance CAPEX, $m
  0
  -224
  -228
  -234
  -240
  -246
  -254
  -262
  -271
  -280
  -291
  -302
  -314
  -327
  -340
  -355
  -370
  -386
  -403
  -422
  -441
  -461
  -482
  -505
  -529
  -554
  -580
  -608
  -637
  -668
  -700
New CAPEX, $m
  -141
  -58
  -67
  -77
  -86
  -96
  -105
  -114
  -124
  -133
  -143
  -153
  -163
  -174
  -185
  -196
  -208
  -220
  -232
  -245
  -259
  -274
  -288
  -304
  -320
  -337
  -355
  -374
  -393
  -414
  -435
Cash from investing activities, $m
  -140
  -282
  -295
  -311
  -326
  -342
  -359
  -376
  -395
  -413
  -434
  -455
  -477
  -501
  -525
  -551
  -578
  -606
  -635
  -667
  -700
  -735
  -770
  -809
  -849
  -891
  -935
  -982
  -1,030
  -1,082
  -1,135
Free cash flow, $m
  126
  -74
  -35
  -43
  -50
  -55
  -59
  -62
  -64
  -64
  -64
  -62
  -59
  -55
  -50
  -44
  -36
  -27
  -17
  -6
  7
  21
  37
  54
  73
  93
  115
  140
  166
  194
  224
Issuance/(repayment) of debt, $m
  -197
  8
  12
  14
  15
  17
  19
  20
  22
  24
  25
  27
  29
  31
  33
  35
  37
  39
  41
  44
  46
  49
  51
  54
  57
  60
  63
  66
  70
  73
  77
Issuance/(repurchase) of shares, $m
  64
  115
  82
  97
  110
  122
  133
  142
  151
  158
  164
  169
  173
  177
  179
  181
  182
  181
  180
  178
  175
  171
  166
  159
  152
  143
  134
  122
  110
  96
  81
Cash from financing (excl. dividends), $m  
  -168
  123
  94
  111
  125
  139
  152
  162
  173
  182
  189
  196
  202
  208
  212
  216
  219
  220
  221
  222
  221
  220
  217
  213
  209
  203
  197
  188
  180
  169
  158
Total cash flow (excl. dividends), $m
  -42
  -65
  -23
  -30
  -35
  -38
  -41
  -42
  -42
  -41
  -38
  -35
  -30
  -24
  -17
  -9
  1
  12
  24
  38
  53
  70
  88
  108
  129
  153
  178
  206
  235
  267
  301
Retained Cash Flow (-), $m
  -59
  -49
  -59
  -67
  -76
  -84
  -92
  -100
  -109
  -117
  -125
  -134
  -143
  -153
  -162
  -172
  -182
  -193
  -204
  -216
  -228
  -240
  -253
  -267
  -281
  -296
  -312
  -328
  -346
  -364
  -382
Prev. year cash balance 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
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
  95.8
  93.0
  89.8
  86.4
  82.9
  79.3
  75.8
  72.4
  69.0
  65.9
  62.9
  60.0
  57.4
  54.9
  52.6
  50.5
  48.6
  46.8
  45.1
  43.7
  42.3
  41.1
  40.0
  39.1
  38.2
  37.5
  36.9
  36.3
  35.9
  35.5

Detour Gold Corporation, an intermediate gold mining company, engages in the acquisition, exploration, development, and operation of mineral properties in Canada. The company’s primary asset is the Detour Lake property located in Northeastern Ontario. Its Detour Lake property consists of a contiguous group of mining claims and leases totaling 625 square kilometers in the District of Cochrane. The company was founded in 2006 and is headquartered in Toronto, Canada.

FINANCIAL RATIOS  of  Detour Gold Corporation (DGC)

Valuation Ratios
P/E Ratio -294.5
Price to Sales 3
Price to Book 1.1
Price to Tangible Book
Price to Cash Flow 10
Price to Free Cash Flow 21.2
Growth Rates
Sales Growth Rate 16.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 3.7%
Cap. Spend. - 3 Yr. Gr. Rate -23.4%
Financial Strength
Quick Ratio 0
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 17.6%
Interest Coverage 0
Management Effectiveness
Return On Assets 0%
Ret/ On Assets - 3 Yr. Avg. -2.8%
Return On Total Capital -0.3%
Ret/ On T. Cap. - 3 Yr. Avg. -4.6%
Return On Equity -0.4%
Return On Equity - 3 Yr. Avg. -5.8%
Asset Turnover 0.3
Profitability Ratios
Gross Margin 14.4%
Gross Margin - 3 Yr. Avg. 5.2%
EBITDA Margin 25.3%
EBITDA Margin - 3 Yr. Avg. 19.3%
Operating Margin 8.4%
Oper. Margin - 3 Yr. Avg. -0.7%
Pre-Tax Margin -3.7%
Pre-Tax Margin - 3 Yr. Avg. -13.2%
Net Profit Margin -1%
Net Profit Margin - 3 Yr. Avg. -19.3%
Effective Tax Rate 72.7%
Eff/ Tax Rate - 3 Yr. Avg. -19.2%
Payout Ratio 0%

DGC stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the DGC stock intrinsic value calculation we used $889 million for the last fiscal year's total revenue generated by Detour Gold Corporation. The default revenue input number comes from 2016 income statement of Detour 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 DGC 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 DGC is calculated based on our internal credit rating of Detour 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 Detour 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 DGC stock the variable cost ratio is equal to 20.7%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $646 million in the base year in the intrinsic value calculation for DGC 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 6.6% for Detour Gold Corporation.

Corporate tax rate of 27% is the nominal tax rate for Detour 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 DGC 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 DGC are equal to 322.2%.

Life of production assets of 12.8 years is the average useful life of capital assets used in Detour 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 DGC is equal to 6.2%. 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 - $2517 million for Detour 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 172.707 million for Detour 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 Detour Gold Corporation at the current share price and the inputted number of shares is $2.6 billion.


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Stock chart of DGC Financial statements of DGC
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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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