Intrinsic value of First Majestic Silver Corp. - FR

Previous Close

$8.24

  Intrinsic Value

$1.31

stock screener

  Rating & Target

str. sell

-84%

  Value-price divergence*

0%

Previous close

$8.24

 
Intrinsic value

$1.31

 
Up/down potential

-84%

 
Rating

str. sell

 
Value-price divergence*

0%

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

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 1.3

 

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, %
  27.03
  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
  376
  388
  402
  416
  432
  449
  467
  486
  506
  528
  551
  575
  601
  628
  657
  687
  719
  753
  788
  825
  865
  906
  950
  996
  1,044
  1,095
  1,148
  1,204
  1,263
  1,325
  1,391
Variable operating expenses, $m
 
  603
  624
  647
  671
  697
  725
  755
  786
  820
  855
  893
  933
  975
  1,020
  1,067
  1,116
  1,169
  1,224
  1,282
  1,343
  1,407
  1,475
  1,546
  1,621
  1,700
  1,783
  1,870
  1,962
  2,058
  2,160
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
  603
  624
  647
  671
  697
  725
  755
  786
  820
  855
  893
  933
  975
  1,020
  1,067
  1,116
  1,169
  1,224
  1,282
  1,343
  1,407
  1,475
  1,546
  1,621
  1,700
  1,783
  1,870
  1,962
  2,058
  2,160
Operating income, $m
  33
  -215
  -222
  -230
  -239
  -248
  -258
  -269
  -280
  -292
  -305
  -318
  -332
  -347
  -363
  -380
  -398
  -416
  -436
  -456
  -478
  -501
  -525
  -551
  -577
  -605
  -635
  -666
  -699
  -733
  -769
EBITDA, $m
  142
  -145
  -150
  -156
  -162
  -168
  -175
  -182
  -189
  -197
  -206
  -215
  -225
  -235
  -246
  -257
  -269
  -281
  -295
  -309
  -323
  -339
  -355
  -372
  -390
  -409
  -429
  -450
  -473
  -496
  -520
Interest expense (income), $m
  9
  5
  6
  8
  9
  10
  12
  13
  15
  17
  19
  21
  23
  26
  28
  31
  33
  36
  39
  42
  46
  49
  53
  57
  61
  66
  70
  75
  80
  85
  91
Earnings before tax, $m
  34
  -220
  -229
  -238
  -248
  -259
  -270
  -282
  -295
  -309
  -324
  -339
  -355
  -373
  -391
  -410
  -431
  -452
  -475
  -499
  -524
  -551
  -578
  -608
  -639
  -671
  -705
  -741
  -779
  -818
  -860
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
  -220
  -229
  -238
  -248
  -259
  -270
  -282
  -295
  -309
  -324
  -339
  -355
  -373
  -391
  -410
  -431
  -452
  -475
  -499
  -524
  -551
  -578
  -608
  -639
  -671
  -705
  -741
  -779
  -818
  -860

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
  996
  1,030
  1,068
  1,108
  1,151
  1,197
  1,246
  1,298
  1,354
  1,412
  1,475
  1,540
  1,610
  1,684
  1,761
  1,843
  1,930
  2,021
  2,116
  2,217
  2,324
  2,436
  2,553
  2,677
  2,807
  2,944
  3,088
  3,240
  3,399
  3,566
Adjusted assets (=assets-cash), $m
  965
  996
  1,030
  1,068
  1,108
  1,151
  1,197
  1,246
  1,298
  1,354
  1,412
  1,475
  1,540
  1,610
  1,684
  1,761
  1,843
  1,930
  2,021
  2,116
  2,217
  2,324
  2,436
  2,553
  2,677
  2,807
  2,944
  3,088
  3,240
  3,399
  3,566
Revenue / Adjusted assets
  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
  0.390
  0.390
Average production assets, $m
  337
  348
  360
  373
  387
  402
  418
  435
  453
  472
  493
  515
  538
  562
  588
  615
  643
  674
  705
  739
  774
  811
  850
  891
  934
  980
  1,028
  1,078
  1,131
  1,186
  1,245
Working capital, $m
  176
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  16
  17
  17
  18
  19
  20
  21
  22
  23
  24
  25
  27
  28
  29
Total debt, $m
  70
  55
  65
  77
  89
  102
  116
  131
  147
  164
  181
  200
  220
  241
  264
  287
  312
  339
  366
  395
  426
  458
  492
  528
  566
  605
  647
  691
  737
  785
  836
Total liabilities, $m
  318
  303
  313
  325
  337
  350
  364
  379
  395
  412
  429
  448
  468
  489
  512
  535
  560
  587
  614
  643
  674
  706
  740
  776
  814
  853
  895
  939
  985
  1,033
  1,084
Total equity, $m
  840
  693
  717
  743
  771
  801
  833
  867
  904
  942
  983
  1,026
  1,072
  1,121
  1,172
  1,226
  1,283
  1,343
  1,406
  1,473
  1,543
  1,617
  1,695
  1,777
  1,863
  1,954
  2,049
  2,149
  2,255
  2,365
  2,482
Total liabilities and equity, $m
  1,158
  996
  1,030
  1,068
  1,108
  1,151
  1,197
  1,246
  1,299
  1,354
  1,412
  1,474
  1,540
  1,610
  1,684
  1,761
  1,843
  1,930
  2,020
  2,116
  2,217
  2,323
  2,435
  2,553
  2,677
  2,807
  2,944
  3,088
  3,240
  3,398
  3,566
Debt-to-equity ratio
  0.083
  0.080
  0.090
  0.100
  0.120
  0.130
  0.140
  0.150
  0.160
  0.170
  0.180
  0.200
  0.210
  0.220
  0.230
  0.230
  0.240
  0.250
  0.260
  0.270
  0.280
  0.280
  0.290
  0.300
  0.300
  0.310
  0.320
  0.320
  0.330
  0.330
  0.340
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
  -220
  -229
  -238
  -248
  -259
  -270
  -282
  -295
  -309
  -324
  -339
  -355
  -373
  -391
  -410
  -431
  -452
  -475
  -499
  -524
  -551
  -578
  -608
  -639
  -671
  -705
  -741
  -779
  -818
  -860
Depreciation, amort., depletion, $m
  109
  70
  72
  75
  77
  80
  84
  87
  91
  94
  99
  103
  108
  112
  118
  123
  129
  135
  141
  148
  155
  162
  170
  178
  187
  196
  206
  216
  226
  237
  249
Funds from operations, $m
  125
  -150
  -157
  -163
  -170
  -178
  -186
  -195
  -205
  -214
  -225
  -236
  -248
  -260
  -274
  -288
  -302
  -318
  -334
  -351
  -369
  -388
  -408
  -430
  -452
  -475
  -500
  -526
  -553
  -581
  -611
Change in working capital, $m
  -10
  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
  1
  1
  1
Cash from operations, $m
  135
  -151
  -157
  -164
  -171
  -179
  -187
  -196
  -205
  -215
  -225
  -237
  -248
  -261
  -274
  -288
  -303
  -318
  -335
  -352
  -370
  -389
  -409
  -431
  -453
  -476
  -501
  -527
  -554
  -583
  -613
Maintenance CAPEX, $m
  0
  -67
  -70
  -72
  -75
  -77
  -80
  -84
  -87
  -91
  -94
  -99
  -103
  -108
  -112
  -118
  -123
  -129
  -135
  -141
  -148
  -155
  -162
  -170
  -178
  -187
  -196
  -206
  -216
  -226
  -237
New CAPEX, $m
  -84
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -21
  -22
  -23
  -24
  -26
  -27
  -29
  -30
  -32
  -33
  -35
  -37
  -39
  -41
  -43
  -45
  -48
  -50
  -53
  -56
  -58
Cash from investing activities, $m
  -90
  -78
  -82
  -85
  -89
  -92
  -96
  -101
  -105
  -110
  -115
  -121
  -126
  -132
  -138
  -145
  -152
  -159
  -167
  -174
  -183
  -192
  -201
  -211
  -221
  -232
  -244
  -256
  -269
  -282
  -295
Free cash flow, $m
  45
  -229
  -239
  -249
  -259
  -271
  -283
  -296
  -310
  -325
  -340
  -357
  -374
  -393
  -412
  -433
  -454
  -477
  -501
  -526
  -553
  -581
  -611
  -642
  -674
  -709
  -745
  -782
  -822
  -864
  -908
Issuance/(repayment) of debt, $m
  -18
  10
  11
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  24
  25
  26
  28
  29
  31
  32
  34
  36
  38
  40
  42
  44
  46
  48
  51
Issuance/(repurchase) of shares, $m
  88
  241
  253
  264
  276
  288
  302
  316
  331
  348
  364
  382
  401
  421
  442
  465
  488
  512
  538
  566
  594
  625
  656
  690
  725
  762
  801
  841
  884
  929
  977
Cash from financing (excl. dividends), $m  
  61
  251
  264
  275
  288
  301
  316
  331
  347
  365
  382
  401
  421
  442
  464
  489
  513
  538
  566
  595
  625
  657
  690
  726
  763
  802
  843
  885
  930
  977
  1,028
Total cash flow (excl. dividends), $m
  105
  22
  25
  27
  29
  31
  33
  35
  37
  39
  42
  44
  47
  50
  52
  55
  58
  62
  65
  68
  72
  76
  80
  84
  88
  93
  98
  103
  108
  113
  119
Retained Cash Flow (-), $m
  -104
  -241
  -253
  -264
  -276
  -288
  -302
  -316
  -331
  -348
  -364
  -382
  -401
  -421
  -442
  -465
  -488
  -512
  -538
  -566
  -594
  -625
  -656
  -690
  -725
  -762
  -801
  -841
  -884
  -929
  -977
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
 
  -51
  -228
  -237
  -247
  -258
  -269
  -281
  -294
  -308
  -323
  -338
  -354
  -372
  -390
  -409
  -430
  -451
  -474
  -497
  -522
  -549
  -577
  -606
  -637
  -669
  -703
  -739
  -776
  -816
  -857
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
 
  -49
  -209
  -206
  -204
  -200
  -195
  -190
  -184
  -177
  -169
  -161
  -151
  -141
  -131
  -120
  -109
  -98
  -87
  -77
  -66
  -57
  -48
  -40
  -32
  -26
  -21
  -16
  -12
  -9
  -6
Current shareholders' claim on cash, %
  100
  81.5
  66.2
  53.7
  43.5
  35.1
  28.4
  22.9
  18.4
  14.8
  11.9
  9.5
  7.6
  6.1
  4.9
  3.9
  3.1
  2.5
  2.0
  1.6
  1.3
  1.0
  0.8
  0.6
  0.5
  0.4
  0.3
  0.3
  0.2
  0.2
  0.1

First Majestic Silver Corp. engages in the acquisition, exploration, development, and production of mineral properties with a focus on silver projects in Mexico. The company owns and operates six silver producing mines, including the La Encantada Mine, La Parrilla Mine, Del Toro Mine, San Martin Mine, La Guitarra Mine, and Santa Elena Mine. It also holds interests in the Plomosas silver project situated in Sinaloa State; La Luz silver project located in San Luis Potosi State; and Jalisco group of properties located in various mining districts in Jalisco, Mexico. The company was formerly known as First Majestic Resource Corp. and changed its name to First Majestic Silver Corp. in November 2006. First Majestic Silver Corp. was founded in 1979 and is headquartered in Vancouver, Canada.

FINANCIAL RATIOS  of  First Majestic Silver Corp. (FR)

Valuation Ratios
P/E Ratio 112.9
Price to Sales 3.6
Price to Book 1.6
Price to Tangible Book
Price to Cash Flow 10
Price to Free Cash Flow 26.6
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 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 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 160.959 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 $1.3 billion.

RELATED COMPANIES Price Int.Val. Rating
FVI Fortuna Silver 5.69 34.79  str.buy
SSO Silver Standar 12.01 4.99  str.sell
THO Tahoe Resource 7.13 2.66  str.sell
Stock chart of FR 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.

FREE DOWNLOAD
Follow us on:   twitter   twitter   twitter   twitter

VALUATION THEORY       ASSET ALLOCATION

About X-FIN       Site news       Privacy policy       Terms of use       FAQ

Copyright © X-FIN.com 2005-2017. All rigths reserved.