Intrinsic value of First Majestic Silver Corp. - FR

Previous Close

$8.53

  Intrinsic Value

$1.28

stock screener

  Rating & Target

str. sell

-85%

Previous close

$8.53

 
Intrinsic value

$1.28

 
Up/down potential

-85%

 
Rating

str. sell

We calculate the intrinsic value of FR 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 1.4

 

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, %
  27.03
  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
  376
  384
  392
  402
  414
  426
  440
  455
  471
  489
  507
  528
  549
  572
  596
  622
  649
  678
  708
  741
  775
  810
  848
  888
  930
  975
  1,021
  1,070
  1,122
  1,176
  1,233
Variable operating expenses, $m
 
  596
  609
  625
  643
  662
  683
  707
  732
  759
  788
  819
  853
  888
  926
  966
  1,008
  1,053
  1,100
  1,150
  1,203
  1,259
  1,317
  1,379
  1,445
  1,513
  1,586
  1,662
  1,742
  1,827
  1,915
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
  342
  596
  609
  625
  643
  662
  683
  707
  732
  759
  788
  819
  853
  888
  926
  966
  1,008
  1,053
  1,100
  1,150
  1,203
  1,259
  1,317
  1,379
  1,445
  1,513
  1,586
  1,662
  1,742
  1,827
  1,915
Operating income, $m
  33
  -212
  -217
  -223
  -229
  -236
  -243
  -252
  -261
  -270
  -281
  -292
  -304
  -316
  -330
  -344
  -359
  -375
  -392
  -410
  -428
  -448
  -469
  -491
  -514
  -539
  -565
  -592
  -620
  -650
  -682
EBITDA, $m
  142
  -143
  -147
  -151
  -155
  -159
  -165
  -170
  -176
  -183
  -190
  -197
  -205
  -214
  -223
  -233
  -243
  -253
  -265
  -277
  -290
  -303
  -317
  -332
  -348
  -364
  -382
  -400
  -420
  -440
  -461
Interest expense (income), $m
  9
  5
  6
  7
  8
  9
  10
  11
  12
  14
  15
  17
  19
  21
  23
  25
  27
  30
  33
  35
  38
  41
  45
  48
  52
  55
  59
  64
  68
  73
  78
Earnings before tax, $m
  34
  -217
  -223
  -229
  -236
  -244
  -253
  -263
  -273
  -284
  -296
  -309
  -323
  -337
  -353
  -369
  -386
  -405
  -424
  -445
  -467
  -489
  -514
  -539
  -566
  -594
  -624
  -655
  -688
  -723
  -760
Tax expense, $m
  22
  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
  12
  -217
  -223
  -229
  -236
  -244
  -253
  -263
  -273
  -284
  -296
  -309
  -323
  -337
  -353
  -369
  -386
  -405
  -424
  -445
  -467
  -489
  -514
  -539
  -566
  -594
  -624
  -655
  -688
  -723
  -760

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  193
  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
  1,158
  983
  1,006
  1,032
  1,061
  1,093
  1,128
  1,167
  1,208
  1,253
  1,301
  1,353
  1,408
  1,466
  1,528
  1,594
  1,664
  1,738
  1,816
  1,899
  1,986
  2,078
  2,175
  2,277
  2,385
  2,499
  2,618
  2,744
  2,877
  3,016
  3,163
Adjusted assets (=assets-cash), $m
  965
  983
  1,006
  1,032
  1,061
  1,093
  1,128
  1,167
  1,208
  1,253
  1,301
  1,353
  1,408
  1,466
  1,528
  1,594
  1,664
  1,738
  1,816
  1,899
  1,986
  2,078
  2,175
  2,277
  2,385
  2,499
  2,618
  2,744
  2,877
  3,016
  3,163
Revenue / Adjusted assets
  0.390
  0.391
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
  0.390
Average production assets, $m
  337
  343
  351
  360
  370
  382
  394
  407
  422
  437
  454
  472
  491
  512
  533
  556
  581
  607
  634
  663
  693
  725
  759
  795
  833
  872
  914
  958
  1,004
  1,053
  1,104
Working capital, $m
  176
  8
  8
  8
  9
  9
  9
  10
  10
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  16
  16
  17
  18
  19
  20
  20
  21
  22
  24
  25
  26
Total debt, $m
  70
  51
  58
  66
  75
  84
  95
  107
  119
  133
  148
  163
  180
  198
  217
  237
  258
  280
  304
  329
  356
  384
  413
  444
  477
  512
  548
  586
  627
  669
  713
Total liabilities, $m
  318
  299
  306
  314
  323
  332
  343
  355
  367
  381
  396
  411
  428
  446
  465
  485
  506
  528
  552
  577
  604
  632
  661
  692
  725
  760
  796
  834
  875
  917
  961
Total equity, $m
  840
  684
  700
  718
  738
  761
  785
  812
  841
  872
  906
  941
  980
  1,020
  1,064
  1,110
  1,158
  1,210
  1,264
  1,322
  1,382
  1,446
  1,514
  1,585
  1,660
  1,739
  1,822
  1,910
  2,002
  2,099
  2,201
Total liabilities and equity, $m
  1,158
  983
  1,006
  1,032
  1,061
  1,093
  1,128
  1,167
  1,208
  1,253
  1,302
  1,352
  1,408
  1,466
  1,529
  1,595
  1,664
  1,738
  1,816
  1,899
  1,986
  2,078
  2,175
  2,277
  2,385
  2,499
  2,618
  2,744
  2,877
  3,016
  3,162
Debt-to-equity ratio
  0.083
  0.070
  0.080
  0.090
  0.100
  0.110
  0.120
  0.130
  0.140
  0.150
  0.160
  0.170
  0.180
  0.190
  0.200
  0.210
  0.220
  0.230
  0.240
  0.250
  0.260
  0.270
  0.270
  0.280
  0.290
  0.290
  0.300
  0.310
  0.310
  0.320
  0.320
Adjusted equity ratio
  0.670
  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
  12
  -217
  -223
  -229
  -236
  -244
  -253
  -263
  -273
  -284
  -296
  -309
  -323
  -337
  -353
  -369
  -386
  -405
  -424
  -445
  -467
  -489
  -514
  -539
  -566
  -594
  -624
  -655
  -688
  -723
  -760
Depreciation, amort., depletion, $m
  109
  69
  70
  72
  74
  76
  79
  81
  84
  87
  91
  94
  98
  102
  107
  111
  116
  121
  127
  133
  139
  145
  152
  159
  167
  174
  183
  192
  201
  211
  221
Funds from operations, $m
  125
  -149
  -153
  -157
  -162
  -168
  -174
  -181
  -189
  -197
  -205
  -214
  -224
  -235
  -246
  -258
  -270
  -283
  -297
  -312
  -328
  -344
  -362
  -380
  -399
  -420
  -441
  -464
  -488
  -513
  -539
Change in working capital, $m
  -10
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
Cash from operations, $m
  135
  -149
  -153
  -157
  -163
  -168
  -175
  -182
  -189
  -197
  -206
  -215
  -225
  -235
  -246
  -258
  -271
  -284
  -298
  -313
  -329
  -345
  -363
  -381
  -400
  -421
  -442
  -465
  -489
  -514
  -540
Maintenance CAPEX, $m
  0
  -67
  -69
  -70
  -72
  -74
  -76
  -79
  -81
  -84
  -87
  -91
  -94
  -98
  -102
  -107
  -111
  -116
  -121
  -127
  -133
  -139
  -145
  -152
  -159
  -167
  -174
  -183
  -192
  -201
  -211
New CAPEX, $m
  -84
  -7
  -8
  -9
  -10
  -11
  -12
  -13
  -15
  -16
  -17
  -18
  -19
  -20
  -22
  -23
  -24
  -26
  -27
  -29
  -30
  -32
  -34
  -36
  -38
  -40
  -42
  -44
  -46
  -49
  -51
Cash from investing activities, $m
  -90
  -74
  -77
  -79
  -82
  -85
  -88
  -92
  -96
  -100
  -104
  -109
  -113
  -118
  -124
  -130
  -135
  -142
  -148
  -156
  -163
  -171
  -179
  -188
  -197
  -207
  -216
  -227
  -238
  -250
  -262
Free cash flow, $m
  45
  -223
  -229
  -237
  -245
  -254
  -263
  -274
  -285
  -297
  -310
  -324
  -338
  -354
  -370
  -388
  -406
  -426
  -447
  -469
  -492
  -516
  -542
  -569
  -597
  -627
  -658
  -692
  -726
  -763
  -802
Issuance/(repayment) of debt, $m
  -18
  6
  7
  8
  9
  10
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  24
  25
  27
  28
  30
  31
  33
  35
  36
  38
  40
  42
  45
Issuance/(repurchase) of shares, $m
  88
  230
  239
  247
  257
  267
  278
  289
  302
  315
  330
  345
  361
  378
  396
  415
  435
  456
  479
  502
  527
  554
  581
  610
  641
  673
  707
  743
  781
  820
  862
Cash from financing (excl. dividends), $m  
  61
  236
  246
  255
  266
  277
  289
  301
  315
  329
  345
  361
  378
  396
  415
  435
  456
  478
  503
  527
  554
  582
  611
  641
  674
  708
  743
  781
  821
  862
  907
Total cash flow (excl. dividends), $m
  105
  13
  16
  18
  21
  23
  25
  27
  30
  32
  34
  37
  39
  42
  44
  47
  50
  53
  56
  59
  62
  66
  69
  73
  77
  81
  85
  90
  94
  99
  104
Retained Cash Flow (-), $m
  -104
  -230
  -239
  -247
  -257
  -267
  -278
  -289
  -302
  -315
  -330
  -345
  -361
  -378
  -396
  -415
  -435
  -456
  -479
  -502
  -527
  -554
  -581
  -610
  -641
  -673
  -707
  -743
  -781
  -820
  -862
Prev. year cash balance distribution, $m
 
  168
  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
 
  -49
  -222
  -229
  -236
  -244
  -253
  -262
  -272
  -283
  -295
  -308
  -322
  -336
  -351
  -368
  -385
  -404
  -423
  -443
  -465
  -488
  -512
  -537
  -564
  -592
  -622
  -653
  -686
  -721
  -757
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
 
  -47
  -204
  -199
  -194
  -189
  -183
  -177
  -170
  -163
  -155
  -146
  -137
  -128
  -118
  -108
  -98
  -88
  -78
  -68
  -59
  -50
  -42
  -35
  -29
  -23
  -18
  -14
  -11
  -8
  -6
Current shareholders' claim on cash, %
  100
  83.0
  68.6
  56.6
  46.6
  38.3
  31.4
  25.7
  21.0
  17.1
  14.0
  11.4
  9.2
  7.5
  6.1
  4.9
  4.0
  3.2
  2.6
  2.1
  1.7
  1.4
  1.1
  0.9
  0.7
  0.6
  0.5
  0.4
  0.3
  0.2
  0.2

First Majestic Silver Corp. is a mining company. The Company is focused on silver production in Mexico and it is pursuing the development of its existing mineral property assets. The Company operates through eight segments, six of which are located in Mexico; one retail market segment in Canada, and one metal trading segment in Europe. Its segments in Mexico are Santa Elena, La Encantada, La Parrilla, Del Toro, San Martin and La Guitarra. Its segment in Canada is Coins and Bullion Sales, and the segment in Europe is Silver Sales. The Company owns and operates approximately six producing silver mines: the La Encantada Silver Mine, La Parrilla Silver Mine, Del Toro Silver Mine, San Martin Silver Mine, La Guitarra Silver Mine and Santa Elena Silver Mine. The Company's subsidiaries include First Majestic Plata, S.A. de C.V., Minera El Pilon, S.A. de C.V., Minera La Encantada, S.A. de C.V., Majestic Services, S.A. de C.V., Santa Elena Oro y Plata, S.A. de C.V. and FMS Trading AG.

FINANCIAL RATIOS  of  First Majestic Silver Corp. (FR)

Valuation Ratios
P/E Ratio 116.9
Price to Sales 3.7
Price to Book 1.7
Price to Tangible Book
Price to Cash Flow 10.4
Price to Free Cash Flow 27.5
Growth Rates
Sales Growth Rate 27%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 9.1%
Cap. Spend. - 3 Yr. Gr. Rate -19%
Financial Strength
Quick Ratio 8
Current Ratio 0
LT Debt to Equity 5.4%
Total Debt to Equity 8.3%
Interest Coverage 5
Management Effectiveness
Return On Assets 1.4%
Ret/ On Assets - 3 Yr. Avg. -6.4%
Return On Total Capital 1.4%
Ret/ On T. Cap. - 3 Yr. Avg. -8.8%
Return On Equity 1.5%
Return On Equity - 3 Yr. Avg. -10%
Asset Turnover 0.3
Profitability Ratios
Gross Margin 46.3%
Gross Margin - 3 Yr. Avg. 40.4%
EBITDA Margin 40.4%
EBITDA Margin - 3 Yr. Avg. 4.4%
Operating Margin 9%
Oper. Margin - 3 Yr. Avg. -26.4%
Pre-Tax Margin 9%
Pre-Tax Margin - 3 Yr. Avg. -27.2%
Net Profit Margin 3.2%
Net Profit Margin - 3 Yr. Avg. -23.7%
Effective Tax Rate 64.7%
Eff/ Tax Rate - 3 Yr. Avg. 34.4%
Payout Ratio 0%

FR stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the FR stock intrinsic value calculation we used $376 million for the last fiscal year's total revenue generated by First Majestic Silver Corp.. The default revenue input number comes from 2016 income statement of First Majestic Silver Corp.. 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 FR 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 FR is calculated based on our internal credit rating of First Majestic Silver Corp., 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 First Majestic Silver Corp..
    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 FR stock the variable cost ratio is equal to 155.3%.

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 FR 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 11.6% for First Majestic Silver Corp..

Corporate tax rate of 27% is the nominal tax rate for First Majestic Silver Corp.. 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 FR 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 FR are equal to 89.5%.

Life of production assets of 3.1 years is the average useful life of capital assets used in First Majestic Silver Corp. 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 FR is equal to 2.1%. 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 - $840 million for First Majestic Silver Corp. - 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 163.835 million for First Majestic Silver Corp. 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 First Majestic Silver Corp. at the current share price and the inputted number of shares is $1.4 billion.

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Financial statements of FR
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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