Intrinsic value of Hudbay Minerals Inc. - HBM

Previous Close

$9.81

  Intrinsic Value

$2.51

stock screener

  Rating & Target

str. sell

-74%

Previous close

$9.81

 
Intrinsic value

$2.51

 
Up/down potential

-74%

 
Rating

str. sell

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 2.3

 

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, %
  27.40
  18.80
  17.42
  16.18
  15.06
  14.05
  13.15
  12.33
  11.60
  10.94
  10.35
  9.81
  9.33
  8.90
  8.51
  8.16
  7.84
  7.56
  7.30
  7.07
  6.86
  6.68
  6.51
  6.36
  6.22
  6.10
  5.99
  5.89
  5.80
  5.72
  5.65
Revenue, $m
  1,525
  1,812
  2,127
  2,471
  2,844
  3,243
  3,670
  4,122
  4,601
  5,104
  5,632
  6,185
  6,762
  7,363
  7,990
  8,641
  9,319
  10,023
  10,755
  11,516
  12,306
  13,128
  13,983
  14,872
  15,797
  16,761
  17,765
  18,812
  19,903
  21,042
  22,231
Variable operating expenses, $m
 
  2,493
  2,927
  3,401
  3,913
  4,463
  5,050
  5,672
  6,330
  7,023
  7,750
  8,510
  9,304
  10,132
  10,994
  11,891
  12,823
  13,792
  14,799
  15,846
  16,933
  18,064
  19,240
  20,463
  21,737
  23,063
  24,445
  25,885
  27,387
  28,954
  30,590
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
  2,493
  2,927
  3,401
  3,913
  4,463
  5,050
  5,672
  6,330
  7,023
  7,750
  8,510
  9,304
  10,132
  10,994
  11,891
  12,823
  13,792
  14,799
  15,846
  16,933
  18,064
  19,240
  20,463
  21,737
  23,063
  24,445
  25,885
  27,387
  28,954
  30,590
Operating income, $m
  228
  -681
  -800
  -929
  -1,069
  -1,219
  -1,380
  -1,550
  -1,730
  -1,919
  -2,118
  -2,325
  -2,542
  -2,769
  -3,004
  -3,249
  -3,504
  -3,769
  -4,044
  -4,330
  -4,627
  -4,936
  -5,257
  -5,592
  -5,940
  -6,302
  -6,680
  -7,073
  -7,484
  -7,912
  -8,359
EBITDA, $m
  632
  -201
  -236
  -275
  -316
  -361
  -408
  -458
  -511
  -567
  -626
  -687
  -752
  -818
  -888
  -961
  -1,036
  -1,114
  -1,195
  -1,280
  -1,368
  -1,459
  -1,554
  -1,653
  -1,756
  -1,863
  -1,975
  -2,091
  -2,212
  -2,339
  -2,471
Interest expense (income), $m
  171
  166
  233
  306
  385
  471
  564
  662
  767
  877
  994
  1,116
  1,243
  1,377
  1,516
  1,661
  1,811
  1,968
  2,131
  2,300
  2,476
  2,658
  2,848
  3,046
  3,252
  3,465
  3,688
  3,920
  4,162
  4,415
  4,678
Earnings before tax, $m
  8
  -847
  -1,032
  -1,235
  -1,454
  -1,691
  -1,943
  -2,212
  -2,497
  -2,796
  -3,111
  -3,441
  -3,786
  -4,145
  -4,520
  -4,910
  -5,315
  -5,737
  -6,175
  -6,630
  -7,103
  -7,595
  -8,106
  -8,638
  -9,191
  -9,768
  -10,368
  -10,994
  -11,646
  -12,326
  -13,037
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
  -847
  -1,032
  -1,235
  -1,454
  -1,691
  -1,943
  -2,212
  -2,497
  -2,796
  -3,111
  -3,441
  -3,786
  -4,145
  -4,520
  -4,910
  -5,315
  -5,737
  -6,175
  -6,630
  -7,103
  -7,595
  -8,106
  -8,638
  -9,191
  -9,768
  -10,368
  -10,994
  -11,646
  -12,326
  -13,037

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
  6,915
  8,119
  9,433
  10,854
  12,379
  14,007
  15,734
  17,560
  19,481
  21,496
  23,605
  25,808
  28,104
  30,495
  32,983
  35,569
  38,257
  41,050
  43,953
  46,970
  50,107
  53,369
  56,762
  60,295
  63,973
  67,806
  71,800
  75,967
  80,314
  84,851
Adjusted assets (=assets-cash), $m
  5,818
  6,915
  8,119
  9,433
  10,854
  12,379
  14,007
  15,734
  17,560
  19,481
  21,496
  23,605
  25,808
  28,104
  30,495
  32,983
  35,569
  38,257
  41,050
  43,953
  46,970
  50,107
  53,369
  56,762
  60,295
  63,973
  67,806
  71,800
  75,967
  80,314
  84,851
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
  6,238
  7,324
  8,509
  9,791
  11,167
  12,635
  14,193
  15,840
  17,573
  19,391
  21,294
  23,280
  25,352
  27,509
  29,753
  32,086
  34,510
  37,030
  39,649
  42,370
  45,200
  48,142
  51,203
  54,390
  57,708
  61,165
  64,769
  68,527
  72,448
  76,541
Working capital, $m
  164
  7
  9
  10
  11
  13
  15
  16
  18
  20
  23
  25
  27
  29
  32
  35
  37
  40
  43
  46
  49
  53
  56
  59
  63
  67
  71
  75
  80
  84
  89
Total debt, $m
  1,739
  2,373
  3,118
  3,930
  4,808
  5,750
  6,756
  7,824
  8,952
  10,139
  11,385
  12,688
  14,049
  15,468
  16,946
  18,483
  20,082
  21,743
  23,469
  25,263
  27,128
  29,066
  31,082
  33,179
  35,362
  37,635
  40,004
  42,473
  45,047
  47,734
  50,538
Total liabilities, $m
  3,639
  4,273
  5,018
  5,830
  6,708
  7,650
  8,656
  9,724
  10,852
  12,039
  13,285
  14,588
  15,949
  17,368
  18,846
  20,383
  21,982
  23,643
  25,369
  27,163
  29,028
  30,966
  32,982
  35,079
  37,262
  39,535
  41,904
  44,373
  46,947
  49,634
  52,438
Total equity, $m
  2,382
  2,641
  3,102
  3,603
  4,146
  4,729
  5,351
  6,011
  6,708
  7,442
  8,212
  9,017
  9,859
  10,736
  11,649
  12,599
  13,587
  14,614
  15,681
  16,790
  17,943
  19,141
  20,387
  21,683
  23,033
  24,438
  25,902
  27,428
  29,019
  30,680
  32,413
Total liabilities and equity, $m
  6,021
  6,914
  8,120
  9,433
  10,854
  12,379
  14,007
  15,735
  17,560
  19,481
  21,497
  23,605
  25,808
  28,104
  30,495
  32,982
  35,569
  38,257
  41,050
  43,953
  46,971
  50,107
  53,369
  56,762
  60,295
  63,973
  67,806
  71,801
  75,966
  80,314
  84,851
Debt-to-equity ratio
  0.730
  0.900
  1.010
  1.090
  1.160
  1.220
  1.260
  1.300
  1.330
  1.360
  1.390
  1.410
  1.430
  1.440
  1.450
  1.470
  1.480
  1.490
  1.500
  1.500
  1.510
  1.520
  1.520
  1.530
  1.540
  1.540
  1.540
  1.550
  1.550
  1.560
  1.560
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
  -847
  -1,032
  -1,235
  -1,454
  -1,691
  -1,943
  -2,212
  -2,497
  -2,796
  -3,111
  -3,441
  -3,786
  -4,145
  -4,520
  -4,910
  -5,315
  -5,737
  -6,175
  -6,630
  -7,103
  -7,595
  -8,106
  -8,638
  -9,191
  -9,768
  -10,368
  -10,994
  -11,646
  -12,326
  -13,037
Depreciation, amort., depletion, $m
  404
  480
  563
  655
  753
  859
  972
  1,092
  1,218
  1,352
  1,492
  1,638
  1,791
  1,950
  2,116
  2,289
  2,468
  2,655
  2,848
  3,050
  3,259
  3,477
  3,703
  3,939
  4,184
  4,439
  4,705
  4,982
  5,271
  5,573
  5,888
Funds from operations, $m
  744
  -367
  -469
  -580
  -701
  -832
  -971
  -1,120
  -1,278
  -1,445
  -1,620
  -1,803
  -1,995
  -2,195
  -2,404
  -2,621
  -2,847
  -3,082
  -3,326
  -3,580
  -3,844
  -4,118
  -4,403
  -4,699
  -5,007
  -5,329
  -5,663
  -6,011
  -6,375
  -6,754
  -7,149
Change in working capital, $m
  102
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  5
  5
Cash from operations, $m
  642
  -369
  -470
  -582
  -703
  -833
  -973
  -1,122
  -1,280
  -1,447
  -1,622
  -1,805
  -1,997
  -2,198
  -2,406
  -2,624
  -2,850
  -3,085
  -3,329
  -3,583
  -3,847
  -4,121
  -4,406
  -4,703
  -5,011
  -5,332
  -5,667
  -6,016
  -6,379
  -6,758
  -7,154
Maintenance CAPEX, $m
  0
  -404
  -480
  -563
  -655
  -753
  -859
  -972
  -1,092
  -1,218
  -1,352
  -1,492
  -1,638
  -1,791
  -1,950
  -2,116
  -2,289
  -2,468
  -2,655
  -2,848
  -3,050
  -3,259
  -3,477
  -3,703
  -3,939
  -4,184
  -4,439
  -4,705
  -4,982
  -5,271
  -5,573
New CAPEX, $m
  -261
  -988
  -1,087
  -1,185
  -1,282
  -1,376
  -1,468
  -1,558
  -1,647
  -1,733
  -1,818
  -1,903
  -1,987
  -2,071
  -2,157
  -2,244
  -2,333
  -2,425
  -2,520
  -2,619
  -2,722
  -2,829
  -2,942
  -3,061
  -3,186
  -3,318
  -3,457
  -3,604
  -3,758
  -3,921
  -4,093
Cash from investing activities, $m
  -199
  -1,392
  -1,567
  -1,748
  -1,937
  -2,129
  -2,327
  -2,530
  -2,739
  -2,951
  -3,170
  -3,395
  -3,625
  -3,862
  -4,107
  -4,360
  -4,622
  -4,893
  -5,175
  -5,467
  -5,772
  -6,088
  -6,419
  -6,764
  -7,125
  -7,502
  -7,896
  -8,309
  -8,740
  -9,192
  -9,666
Free cash flow, $m
  443
  -1,760
  -2,037
  -2,330
  -2,639
  -2,962
  -3,300
  -3,652
  -4,018
  -4,398
  -4,792
  -5,200
  -5,622
  -6,060
  -6,514
  -6,984
  -7,472
  -7,978
  -8,504
  -9,050
  -9,618
  -10,210
  -10,825
  -11,467
  -12,136
  -12,834
  -13,563
  -14,324
  -15,119
  -15,951
  -16,820
Issuance/(repayment) of debt, $m
  -126
  679
  744
  812
  878
  943
  1,006
  1,068
  1,128
  1,187
  1,246
  1,303
  1,361
  1,419
  1,478
  1,537
  1,598
  1,661
  1,726
  1,794
  1,865
  1,938
  2,016
  2,097
  2,183
  2,273
  2,368
  2,469
  2,575
  2,686
  2,804
Issuance/(repurchase) of shares, $m
  16
  1,265
  1,493
  1,737
  1,997
  2,273
  2,565
  2,872
  3,194
  3,530
  3,881
  4,247
  4,627
  5,023
  5,433
  5,860
  6,303
  6,764
  7,242
  7,739
  8,255
  8,793
  9,352
  9,934
  10,541
  11,173
  11,832
  12,520
  13,237
  13,987
  14,770
Cash from financing (excl. dividends), $m  
  -314
  1,944
  2,237
  2,549
  2,875
  3,216
  3,571
  3,940
  4,322
  4,717
  5,127
  5,550
  5,988
  6,442
  6,911
  7,397
  7,901
  8,425
  8,968
  9,533
  10,120
  10,731
  11,368
  12,031
  12,724
  13,446
  14,200
  14,989
  15,812
  16,673
  17,574
Total cash flow (excl. dividends), $m
  131
  184
  200
  218
  236
  254
  271
  287
  303
  319
  335
  351
  366
  382
  398
  414
  430
  447
  464
  483
  502
  522
  542
  564
  587
  612
  637
  664
  693
  723
  755
Retained Cash Flow (-), $m
  33
  -1,265
  -1,493
  -1,737
  -1,997
  -2,273
  -2,565
  -2,872
  -3,194
  -3,530
  -3,881
  -4,247
  -4,627
  -5,023
  -5,433
  -5,860
  -6,303
  -6,764
  -7,242
  -7,739
  -8,255
  -8,793
  -9,352
  -9,934
  -10,541
  -11,173
  -11,832
  -12,520
  -13,237
  -13,987
  -14,770
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
 
  -923
  -1,292
  -1,518
  -1,761
  -2,020
  -2,294
  -2,585
  -2,890
  -3,211
  -3,546
  -3,896
  -4,261
  -4,641
  -5,036
  -5,447
  -5,873
  -6,317
  -6,777
  -7,256
  -7,754
  -8,271
  -8,810
  -9,370
  -9,953
  -10,561
  -11,195
  -11,855
  -12,545
  -13,264
  -14,016
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
 
  -870
  -1,144
  -1,253
  -1,346
  -1,420
  -1,474
  -1,504
  -1,511
  -1,495
  -1,456
  -1,397
  -1,319
  -1,227
  -1,123
  -1,011
  -896
  -779
  -666
  -559
  -461
  -372
  -294
  -227
  -172
  -127
  -91
  -64
  -44
  -29
  -19
Current shareholders' claim on cash, %
  100
  63.2
  40.1
  25.5
  16.3
  10.4
  6.7
  4.3
  2.8
  1.8
  1.2
  0.8
  0.5
  0.3
  0.2
  0.1
  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

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 -48.5
Price to Sales 1.5
Price to Book 1
Price to Tangible Book
Price to Cash Flow 3.6
Price to Free Cash Flow 6.1
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 -22.8%
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 18.8% 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 237.563 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 $2.3 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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