Intrinsic value of Hudbay Minerals Inc. - HBM

Previous Close

$9.15

  Intrinsic Value

$2.51

stock screener

  Rating & Target

str. sell

-73%

  Value-price divergence*

0%

Previous close

$9.15

 
Intrinsic value

$2.51

 
Up/down potential

-73%

 
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 HBM 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 2.2

 

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, %
  27.40
  31.40
  28.76
  26.38
  24.25
  22.32
  20.59
  19.03
  17.63
  16.36
  15.23
  14.21
  13.28
  12.46
  11.71
  11.04
  10.44
  9.89
  9.40
  8.96
  8.57
  8.21
  7.89
  7.60
  7.34
  7.11
  6.90
  6.71
  6.54
  6.38
  6.24
Revenue, $m
  1,525
  2,004
  2,580
  3,261
  4,052
  4,956
  5,976
  7,114
  8,367
  9,737
  11,219
  12,813
  14,515
  16,323
  18,235
  20,248
  22,361
  24,573
  26,883
  29,293
  31,802
  34,413
  37,128
  39,949
  42,881
  45,929
  49,095
  52,388
  55,811
  59,373
  63,080
Variable operating expenses, $m
 
  2,757
  3,550
  4,487
  5,575
  6,819
  8,223
  9,788
  11,514
  13,398
  15,438
  17,631
  19,973
  22,461
  25,091
  27,861
  30,769
  33,812
  36,991
  40,307
  43,760
  47,352
  51,088
  54,970
  59,005
  63,198
  67,555
  72,085
  76,796
  81,697
  86,798
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
  1,297
  2,757
  3,550
  4,487
  5,575
  6,819
  8,223
  9,788
  11,514
  13,398
  15,438
  17,631
  19,973
  22,461
  25,091
  27,861
  30,769
  33,812
  36,991
  40,307
  43,760
  47,352
  51,088
  54,970
  59,005
  63,198
  67,555
  72,085
  76,796
  81,697
  86,798
Operating income, $m
  228
  -753
  -970
  -1,226
  -1,523
  -1,863
  -2,247
  -2,675
  -3,146
  -3,661
  -4,218
  -4,818
  -5,458
  -6,138
  -6,856
  -7,613
  -8,408
  -9,239
  -10,108
  -11,014
  -11,958
  -12,939
  -13,960
  -15,021
  -16,123
  -17,269
  -18,460
  -19,698
  -20,985
  -22,324
  -23,718
EBITDA, $m
  632
  -223
  -287
  -362
  -450
  -551
  -664
  -791
  -930
  -1,082
  -1,247
  -1,424
  -1,613
  -1,814
  -2,027
  -2,251
  -2,485
  -2,731
  -2,988
  -3,256
  -3,535
  -3,825
  -4,127
  -4,441
  -4,766
  -5,105
  -5,457
  -5,823
  -6,204
  -6,600
  -7,012
Interest expense (income), $m
  171
  166
  277
  410
  568
  750
  959
  1,195
  1,458
  1,748
  2,065
  2,407
  2,776
  3,169
  3,587
  4,029
  4,494
  4,983
  5,494
  6,028
  6,585
  7,165
  7,769
  8,396
  9,048
  9,726
  10,431
  11,163
  11,924
  12,715
  13,538
Earnings before tax, $m
  8
  -919
  -1,247
  -1,636
  -2,091
  -2,614
  -3,206
  -3,870
  -4,604
  -5,409
  -6,283
  -7,225
  -8,233
  -9,307
  -10,443
  -11,642
  -12,902
  -14,222
  -15,602
  -17,042
  -18,543
  -20,104
  -21,729
  -23,417
  -25,172
  -26,995
  -28,891
  -30,860
  -32,909
  -35,039
  -37,256
Tax expense, $m
  56
  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
  -48
  -919
  -1,247
  -1,636
  -2,091
  -2,614
  -3,206
  -3,870
  -4,604
  -5,409
  -6,283
  -7,225
  -8,233
  -9,307
  -10,443
  -11,642
  -12,902
  -14,222
  -15,602
  -17,042
  -18,543
  -20,104
  -21,729
  -23,417
  -25,172
  -26,995
  -28,891
  -30,860
  -32,909
  -35,039
  -37,256

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  203
  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
  6,021
  7,648
  9,848
  12,446
  15,464
  18,916
  22,810
  27,151
  31,937
  37,163
  42,822
  48,905
  55,402
  62,303
  69,599
  77,282
  85,347
  93,789
  102,608
  111,804
  121,382
  131,347
  141,708
  152,478
  163,670
  175,300
  187,387
  199,953
  213,020
  226,614
  240,763
Adjusted assets (=assets-cash), $m
  5,818
  7,648
  9,848
  12,446
  15,464
  18,916
  22,810
  27,151
  31,937
  37,163
  42,822
  48,905
  55,402
  62,303
  69,599
  77,282
  85,347
  93,789
  102,608
  111,804
  121,382
  131,347
  141,708
  152,478
  163,670
  175,300
  187,387
  199,953
  213,020
  226,614
  240,763
Revenue / Adjusted assets
  0.262
  0.262
  0.262
  0.262
  0.262
  0.262
  0.262
  0.262
  0.262
  0.262
  0.262
  0.262
  0.262
  0.262
  0.262
  0.262
  0.262
  0.262
  0.262
  0.262
  0.262
  0.262
  0.262
  0.262
  0.262
  0.262
  0.262
  0.262
  0.262
  0.262
  0.262
Average production assets, $m
  5,250
  6,899
  8,883
  11,227
  13,949
  17,063
  20,576
  24,492
  28,809
  33,523
  38,628
  44,116
  49,976
  56,201
  62,783
  69,714
  76,989
  84,604
  92,559
  100,855
  109,495
  118,484
  127,830
  137,545
  147,641
  158,132
  169,035
  180,371
  192,158
  204,421
  217,184
Working capital, $m
  164
  8
  10
  13
  16
  20
  24
  28
  33
  39
  45
  51
  58
  65
  73
  81
  89
  98
  108
  117
  127
  138
  149
  160
  172
  184
  196
  210
  223
  237
  252
Total debt, $m
  1,739
  2,827
  4,186
  5,792
  7,657
  9,790
  12,197
  14,879
  17,837
  21,067
  24,564
  28,323
  32,338
  36,603
  41,112
  45,860
  50,844
  56,062
  61,512
  67,195
  73,114
  79,272
  85,676
  92,331
  99,248
  106,435
  113,905
  121,671
  129,746
  138,147
  146,891
Total liabilities, $m
  3,639
  4,727
  6,086
  7,692
  9,557
  11,690
  14,097
  16,779
  19,737
  22,967
  26,464
  30,223
  34,238
  38,503
  43,012
  47,760
  52,744
  57,962
  63,412
  69,095
  75,014
  81,172
  87,576
  94,231
  101,148
  108,335
  115,805
  123,571
  131,646
  140,047
  148,791
Total equity, $m
  2,382
  2,922
  3,762
  4,754
  5,907
  7,226
  8,713
  10,372
  12,200
  14,196
  16,358
  18,682
  21,164
  23,800
  26,587
  29,522
  32,603
  35,828
  39,196
  42,709
  46,368
  50,175
  54,133
  58,247
  62,522
  66,964
  71,582
  76,382
  81,374
  86,567
  91,971
Total liabilities and equity, $m
  6,021
  7,649
  9,848
  12,446
  15,464
  18,916
  22,810
  27,151
  31,937
  37,163
  42,822
  48,905
  55,402
  62,303
  69,599
  77,282
  85,347
  93,790
  102,608
  111,804
  121,382
  131,347
  141,709
  152,478
  163,670
  175,299
  187,387
  199,953
  213,020
  226,614
  240,762
Debt-to-equity ratio
  0.730
  0.970
  1.110
  1.220
  1.300
  1.350
  1.400
  1.430
  1.460
  1.480
  1.500
  1.520
  1.530
  1.540
  1.550
  1.550
  1.560
  1.560
  1.570
  1.570
  1.580
  1.580
  1.580
  1.590
  1.590
  1.590
  1.590
  1.590
  1.590
  1.600
  1.600
Adjusted equity ratio
  0.375
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382
  0.382

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -48
  -919
  -1,247
  -1,636
  -2,091
  -2,614
  -3,206
  -3,870
  -4,604
  -5,409
  -6,283
  -7,225
  -8,233
  -9,307
  -10,443
  -11,642
  -12,902
  -14,222
  -15,602
  -17,042
  -18,543
  -20,104
  -21,729
  -23,417
  -25,172
  -26,995
  -28,891
  -30,860
  -32,909
  -35,039
  -37,256
Depreciation, amort., depletion, $m
  404
  531
  683
  864
  1,073
  1,313
  1,583
  1,884
  2,216
  2,579
  2,971
  3,394
  3,844
  4,323
  4,829
  5,363
  5,922
  6,508
  7,120
  7,758
  8,423
  9,114
  9,833
  10,580
  11,357
  12,164
  13,003
  13,875
  14,781
  15,725
  16,706
Funds from operations, $m
  744
  -389
  -564
  -773
  -1,018
  -1,301
  -1,624
  -1,986
  -2,388
  -2,830
  -3,312
  -3,832
  -4,389
  -4,984
  -5,614
  -6,280
  -6,980
  -7,714
  -8,482
  -9,284
  -10,120
  -10,990
  -11,896
  -12,837
  -13,815
  -14,831
  -15,888
  -16,986
  -18,127
  -19,315
  -20,550
Change in working capital, $m
  102
  2
  2
  3
  3
  4
  4
  5
  5
  5
  6
  6
  7
  7
  8
  8
  8
  9
  9
  10
  10
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
Cash from operations, $m
  642
  -391
  -566
  -775
  -1,021
  -1,305
  -1,628
  -1,991
  -2,393
  -2,836
  -3,318
  -3,838
  -4,396
  -4,991
  -5,622
  -6,288
  -6,988
  -7,723
  -8,491
  -9,294
  -10,130
  -11,001
  -11,906
  -12,848
  -13,827
  -14,844
  -15,900
  -16,999
  -18,141
  -19,329
  -20,565
Maintenance CAPEX, $m
  0
  -404
  -531
  -683
  -864
  -1,073
  -1,313
  -1,583
  -1,884
  -2,216
  -2,579
  -2,971
  -3,394
  -3,844
  -4,323
  -4,829
  -5,363
  -5,922
  -6,508
  -7,120
  -7,758
  -8,423
  -9,114
  -9,833
  -10,580
  -11,357
  -12,164
  -13,003
  -13,875
  -14,781
  -15,725
New CAPEX, $m
  -261
  -1,649
  -1,984
  -2,344
  -2,722
  -3,114
  -3,513
  -3,916
  -4,317
  -4,714
  -5,105
  -5,487
  -5,861
  -6,225
  -6,581
  -6,931
  -7,275
  -7,616
  -7,955
  -8,296
  -8,639
  -8,989
  -9,347
  -9,715
  -10,096
  -10,491
  -10,904
  -11,335
  -11,787
  -12,263
  -12,763
Cash from investing activities, $m
  -199
  -2,053
  -2,515
  -3,027
  -3,586
  -4,187
  -4,826
  -5,499
  -6,201
  -6,930
  -7,684
  -8,458
  -9,255
  -10,069
  -10,904
  -11,760
  -12,638
  -13,538
  -14,463
  -15,416
  -16,397
  -17,412
  -18,461
  -19,548
  -20,676
  -21,848
  -23,068
  -24,338
  -25,662
  -27,044
  -28,488
Free cash flow, $m
  443
  -2,444
  -3,081
  -3,803
  -4,607
  -5,492
  -6,453
  -7,489
  -8,594
  -9,766
  -11,001
  -12,296
  -13,650
  -15,060
  -16,526
  -18,048
  -19,626
  -21,261
  -22,955
  -24,709
  -26,528
  -28,412
  -30,367
  -32,396
  -34,503
  -36,692
  -38,968
  -41,337
  -43,803
  -46,373
  -49,052
Issuance/(repayment) of debt, $m
  -126
  1,133
  1,359
  1,606
  1,865
  2,133
  2,407
  2,683
  2,958
  3,230
  3,497
  3,759
  4,015
  4,265
  4,509
  4,748
  4,984
  5,217
  5,450
  5,683
  5,919
  6,158
  6,403
  6,656
  6,916
  7,187
  7,470
  7,766
  8,076
  8,401
  8,744
Issuance/(repurchase) of shares, $m
  16
  1,617
  2,087
  2,629
  3,244
  3,932
  4,694
  5,528
  6,433
  7,405
  8,445
  9,549
  10,715
  11,943
  13,230
  14,577
  15,983
  17,447
  18,971
  20,555
  22,201
  23,911
  25,687
  27,531
  29,447
  31,438
  33,508
  35,661
  37,900
  40,232
  42,661
Cash from financing (excl. dividends), $m  
  -314
  2,750
  3,446
  4,235
  5,109
  6,065
  7,101
  8,211
  9,391
  10,635
  11,942
  13,308
  14,730
  16,208
  17,739
  19,325
  20,967
  22,664
  24,421
  26,238
  28,120
  30,069
  32,090
  34,187
  36,363
  38,625
  40,978
  43,427
  45,976
  48,633
  51,405
Total cash flow (excl. dividends), $m
  131
  306
  366
  432
  502
  574
  648
  722
  796
  869
  941
  1,011
  1,080
  1,147
  1,213
  1,278
  1,341
  1,404
  1,466
  1,529
  1,592
  1,657
  1,723
  1,791
  1,861
  1,934
  2,010
  2,089
  2,173
  2,260
  2,353
Retained Cash Flow (-), $m
  33
  -1,617
  -2,087
  -2,629
  -3,244
  -3,932
  -4,694
  -5,528
  -6,433
  -7,405
  -8,445
  -9,549
  -10,715
  -11,943
  -13,230
  -14,577
  -15,983
  -17,447
  -18,971
  -20,555
  -22,201
  -23,911
  -25,687
  -27,531
  -29,447
  -31,438
  -33,508
  -35,661
  -37,900
  -40,232
  -42,661
Prev. year cash balance distribution, $m
 
  158
  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
 
  -1,153
  -1,722
  -2,197
  -2,742
  -3,358
  -4,047
  -4,806
  -5,637
  -6,536
  -7,504
  -8,537
  -9,635
  -10,795
  -12,017
  -13,300
  -14,642
  -16,043
  -17,505
  -19,026
  -20,609
  -22,254
  -23,964
  -25,740
  -27,586
  -29,504
  -31,498
  -33,571
  -35,728
  -37,972
  -40,309
Discount rate, %
 
  6.00
  6.30
  6.62
  6.95
  7.29
  7.66
  8.04
  8.44
  8.86
  9.31
  9.77
  10.26
  10.78
  11.31
  11.88
  12.47
  13.10
  13.75
  14.44
  15.16
  15.92
  16.72
  17.55
  18.43
  19.35
  20.32
  21.33
  22.40
  23.52
  24.70
PV of cash for distribution, $m
 
  -1,088
  -1,524
  -1,813
  -2,096
  -2,362
  -2,599
  -2,797
  -2,947
  -3,043
  -3,082
  -3,061
  -2,984
  -2,854
  -2,680
  -2,469
  -2,232
  -1,980
  -1,721
  -1,467
  -1,224
  -1,000
  -799
  -624
  -476
  -354
  -257
  -181
  -124
  -83
  -54
Current shareholders' claim on cash, %
  100
  55.6
  31.2
  17.6
  10.1
  5.8
  3.4
  2.0
  1.2
  0.7
  0.4
  0.3
  0.2
  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
  0.0
  0.0
  0.0
  0.0

Hudbay Minerals Inc is a Canada-based mining company. The Company is engaged in the production of copper concentrate, consisting of copper, gold and silver, as well as zinc metal. The Company is focused on the discovery, production and marketing of base and precious metals. The Company has assets in North and South America. Through its subsidiaries, the Company owns approximately four polymetallic mines, four ore concentrators and a zinc production facility in northern Manitoba and Saskatchewan (Canada) and Cusco (Peru), as well as a copper project in Arizona (the United States). The Company owns Constancia mine, an open pit copper mine in Peru. It owns 777 mine, an underground copper, zinc, gold and silver mine in Flin Flon, Manitoba. It owns Lalor mine, an underground zinc, copper and gold mine near Snow Lake, Manitoba. It also owns Rosemont project, a copper development project in Pima County, Arizona, in the United States.

FINANCIAL RATIOS  of  Hudbay Minerals Inc. (HBM)

Valuation Ratios
P/E Ratio -45.2
Price to Sales 1.4
Price to Book 0.9
Price to Tangible Book
Price to Cash Flow 3.4
Price to Free Cash Flow 5.7
Growth Rates
Sales Growth Rate 27.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -60.6%
Cap. Spend. - 3 Yr. Gr. Rate -23.1%
Financial Strength
Quick Ratio 5
Current Ratio 0
LT Debt to Equity 71.1%
Total Debt to Equity 73%
Interest Coverage 1
Management Effectiveness
Return On Assets -17.8%
Ret/ On Assets - 3 Yr. Avg. -3.9%
Return On Total Capital -1.2%
Ret/ On T. Cap. - 3 Yr. Avg. -3.1%
Return On Equity -2%
Return On Equity - 3 Yr. Avg. -5.1%
Asset Turnover 0.3
Profitability Ratios
Gross Margin 19.7%
Gross Margin - 3 Yr. Avg. 14.8%
EBITDA Margin 38.2%
EBITDA Margin - 3 Yr. Avg. 21.9%
Operating Margin 15%
Oper. Margin - 3 Yr. Avg. -9.5%
Pre-Tax Margin 0.5%
Pre-Tax Margin - 3 Yr. Avg. -13.9%
Net Profit Margin -3.1%
Net Profit Margin - 3 Yr. Avg. -9.2%
Effective Tax Rate 700%
Eff/ Tax Rate - 3 Yr. Avg. 117.9%
Payout Ratio -10.4%

HBM stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the HBM stock intrinsic value calculation we used $1525 million for the last fiscal year's total revenue generated by Hudbay Minerals Inc.. The default revenue input number comes from 2016 income statement of Hudbay Minerals 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 HBM stock valuation model: a) initial revenue growth rate of 31.4% 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 6%, whose default value for HBM is calculated based on our internal credit rating of Hudbay Minerals 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 Hudbay Minerals 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 HBM stock the variable cost ratio is equal to 137.6%.

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 HBM 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 9.8% for Hudbay Minerals Inc..

Corporate tax rate of 27% is the nominal tax rate for Hudbay Minerals 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 HBM 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 HBM are equal to 344.3%.

Life of production assets of 13 years is the average useful life of capital assets used in Hudbay Minerals 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 HBM is equal to 0.4%. 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 - $2382 million for Hudbay Minerals 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 237.132 million for Hudbay Minerals 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 Hudbay Minerals Inc. at the current share price and the inputted number of shares is $2.2 billion.

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Financial statements of HBM
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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