Intrinsic value of Kinross Gold Corporation - K

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$5.22

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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Previous close

$5.22

 
Intrinsic value

$1.06

 
Up/down potential

-80%

 
Rating

str. sell

 
Value-price divergence* premium content

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

We calculate the intrinsic value of K 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 6.6

 

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, %
  13.75
  27.90
  25.61
  23.55
  21.69
  20.02
  18.52
  17.17
  15.95
  14.86
  13.87
  12.98
  12.19
  11.47
  10.82
  10.24
  9.71
  9.24
  8.82
  8.44
  8.09
  7.78
  7.51
  7.26
  7.03
  6.83
  6.64
  6.48
  6.33
  6.20
  6.08
Revenue, $m
  4,691
  6,000
  7,536
  9,311
  11,331
  13,600
  16,119
  18,887
  21,900
  25,153
  28,643
  32,362
  36,306
  40,469
  44,848
  49,440
  54,243
  59,257
  64,483
  69,923
  75,583
  81,466
  87,581
  93,935
  100,538
  107,401
  114,537
  121,959
  129,681
  137,719
  146,090
Variable operating expenses, $m
 
  7,470
  9,377
  11,580
  14,087
  16,904
  20,031
  23,466
  27,206
  31,245
  35,577
  40,171
  45,067
  50,235
  55,670
  61,370
  67,332
  73,556
  80,043
  86,797
  93,822
  101,125
  108,715
  116,602
  124,799
  133,318
  142,176
  151,389
  160,974
  170,952
  181,343
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
  4,628
  7,470
  9,377
  11,580
  14,087
  16,904
  20,031
  23,466
  27,206
  31,245
  35,577
  40,171
  45,067
  50,235
  55,670
  61,370
  67,332
  73,556
  80,043
  86,797
  93,822
  101,125
  108,715
  116,602
  124,799
  133,318
  142,176
  151,389
  160,974
  170,952
  181,343
Operating income, $m
  63
  -1,470
  -1,841
  -2,269
  -2,756
  -3,304
  -3,912
  -4,580
  -5,307
  -6,092
  -6,934
  -7,809
  -8,761
  -9,766
  -10,822
  -11,930
  -13,089
  -14,299
  -15,560
  -16,873
  -18,239
  -19,659
  -21,134
  -22,667
  -24,261
  -25,917
  -27,639
  -29,430
  -31,293
  -33,233
  -35,253
EBITDA, $m
  1,218
  -31
  -38
  -48
  -58
  -69
  -82
  -96
  -112
  -128
  -146
  -165
  -185
  -207
  -229
  -252
  -277
  -302
  -329
  -357
  -386
  -416
  -447
  -479
  -513
  -548
  -585
  -622
  -662
  -703
  -746
Interest expense (income), $m
  99
  91
  148
  214
  291
  378
  475
  584
  703
  833
  973
  1,124
  1,284
  1,454
  1,634
  1,822
  2,020
  2,227
  2,443
  2,669
  2,903
  3,147
  3,401
  3,664
  3,938
  4,223
  4,518
  4,826
  5,146
  5,479
  5,825
Earnings before tax, $m
  -80
  -1,561
  -1,989
  -2,483
  -3,047
  -3,682
  -4,387
  -5,164
  -6,010
  -6,925
  -7,907
  -8,933
  -10,045
  -11,220
  -12,456
  -13,753
  -15,110
  -16,527
  -18,004
  -19,542
  -21,142
  -22,806
  -24,535
  -26,332
  -28,199
  -30,140
  -32,157
  -34,256
  -36,439
  -38,712
  -41,078
Tax expense, $m
  67
  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
  -141
  -1,561
  -1,989
  -2,483
  -3,047
  -3,682
  -4,387
  -5,164
  -6,010
  -6,925
  -7,907
  -8,933
  -10,045
  -11,220
  -12,456
  -13,753
  -15,110
  -16,527
  -18,004
  -19,542
  -21,142
  -22,806
  -24,535
  -26,332
  -28,199
  -30,140
  -32,157
  -34,256
  -36,439
  -38,712
  -41,078

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  1,117
  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
  10,781
  12,371
  15,539
  19,198
  23,363
  28,041
  33,235
  38,942
  45,154
  51,863
  59,057
  66,726
  74,857
  83,441
  92,470
  101,938
  111,841
  122,179
  132,954
  144,172
  155,841
  167,971
  180,579
  193,680
  207,295
  221,446
  236,159
  251,461
  267,383
  283,956
  301,217
Adjusted assets (=assets-cash), $m
  9,664
  12,371
  15,539
  19,198
  23,363
  28,041
  33,235
  38,942
  45,154
  51,863
  59,057
  66,726
  74,857
  83,441
  92,470
  101,938
  111,841
  122,179
  132,954
  144,172
  155,841
  167,971
  180,579
  193,680
  207,295
  221,446
  236,159
  251,461
  267,383
  283,956
  301,217
Revenue / Adjusted assets
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
Average production assets, $m
  6,425
  8,220
  10,325
  12,756
  15,523
  18,632
  22,083
  25,875
  30,003
  34,460
  39,241
  44,336
  49,739
  55,443
  61,442
  67,733
  74,313
  81,182
  88,342
  95,795
  103,548
  111,609
  119,986
  128,691
  137,737
  147,140
  156,916
  167,083
  177,663
  188,675
  200,144
Working capital, $m
  1,949
  1,062
  1,334
  1,648
  2,006
  2,407
  2,853
  3,343
  3,876
  4,452
  5,070
  5,728
  6,426
  7,163
  7,938
  8,751
  9,601
  10,488
  11,413
  12,376
  13,378
  14,420
  15,502
  16,626
  17,795
  19,010
  20,273
  21,587
  22,953
  24,376
  25,858
Total debt, $m
  2,342
  3,793
  5,491
  7,452
  9,685
  12,192
  14,976
  18,035
  21,365
  24,960
  28,817
  32,927
  37,285
  41,887
  46,726
  51,801
  57,109
  62,650
  68,426
  74,438
  80,693
  87,195
  93,952
  100,974
  108,272
  115,857
  123,743
  131,945
  140,479
  149,363
  158,614
Total liabilities, $m
  5,180
  6,631
  8,329
  10,290
  12,523
  15,030
  17,814
  20,873
  24,203
  27,798
  31,655
  35,765
  40,123
  44,725
  49,564
  54,639
  59,947
  65,488
  71,264
  77,276
  83,531
  90,033
  96,790
  103,812
  111,110
  118,695
  126,581
  134,783
  143,317
  152,201
  161,452
Total equity, $m
  5,601
  5,740
  7,210
  8,908
  10,840
  13,011
  15,421
  18,069
  20,951
  24,064
  27,403
  30,961
  34,734
  38,717
  42,906
  47,299
  51,894
  56,691
  61,691
  66,896
  72,310
  77,939
  83,789
  89,868
  96,185
  102,751
  109,578
  116,678
  124,066
  131,756
  139,765
Total liabilities and equity, $m
  10,781
  12,371
  15,539
  19,198
  23,363
  28,041
  33,235
  38,942
  45,154
  51,862
  59,058
  66,726
  74,857
  83,442
  92,470
  101,938
  111,841
  122,179
  132,955
  144,172
  155,841
  167,972
  180,579
  193,680
  207,295
  221,446
  236,159
  251,461
  267,383
  283,957
  301,217
Debt-to-equity ratio
  0.418
  0.660
  0.760
  0.840
  0.890
  0.940
  0.970
  1.000
  1.020
  1.040
  1.050
  1.060
  1.070
  1.080
  1.090
  1.100
  1.100
  1.110
  1.110
  1.110
  1.120
  1.120
  1.120
  1.120
  1.130
  1.130
  1.130
  1.130
  1.130
  1.130
  1.130
Adjusted equity ratio
  0.464
  0.464
  0.464
  0.464
  0.464
  0.464
  0.464
  0.464
  0.464
  0.464
  0.464
  0.464
  0.464
  0.464
  0.464
  0.464
  0.464
  0.464
  0.464
  0.464
  0.464
  0.464
  0.464
  0.464
  0.464
  0.464
  0.464
  0.464
  0.464
  0.464
  0.464

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -141
  -1,561
  -1,989
  -2,483
  -3,047
  -3,682
  -4,387
  -5,164
  -6,010
  -6,925
  -7,907
  -8,933
  -10,045
  -11,220
  -12,456
  -13,753
  -15,110
  -16,527
  -18,004
  -19,542
  -21,142
  -22,806
  -24,535
  -26,332
  -28,199
  -30,140
  -32,157
  -34,256
  -36,439
  -38,712
  -41,078
Depreciation, amort., depletion, $m
  1,155
  1,439
  1,802
  2,221
  2,698
  3,234
  3,829
  4,483
  5,195
  5,963
  6,788
  7,644
  8,576
  9,559
  10,593
  11,678
  12,813
  13,997
  15,231
  16,516
  17,853
  19,243
  20,687
  22,188
  23,748
  25,369
  27,054
  28,807
  30,631
  32,530
  34,508
Funds from operations, $m
  1,718
  -122
  -186
  -262
  -348
  -447
  -558
  -680
  -815
  -962
  -1,120
  -1,289
  -1,469
  -1,661
  -1,862
  -2,075
  -2,297
  -2,530
  -2,772
  -3,025
  -3,289
  -3,563
  -3,848
  -4,144
  -4,451
  -4,771
  -5,103
  -5,448
  -5,808
  -6,182
  -6,571
Change in working capital, $m
  233
  232
  272
  314
  358
  402
  446
  490
  533
  576
  618
  658
  698
  737
  775
  813
  850
  887
  925
  963
  1,002
  1,041
  1,082
  1,125
  1,169
  1,215
  1,263
  1,314
  1,367
  1,423
  1,482
Cash from operations, $m
  1,485
  -135
  -458
  -576
  -706
  -849
  -1,004
  -1,170
  -1,348
  -1,538
  -1,737
  -1,947
  -2,167
  -2,398
  -2,638
  -2,887
  -3,147
  -3,417
  -3,697
  -3,988
  -4,290
  -4,604
  -4,930
  -5,268
  -5,620
  -5,986
  -6,366
  -6,762
  -7,174
  -7,604
  -8,052
Maintenance CAPEX, $m
  0
  -1,108
  -1,417
  -1,780
  -2,199
  -2,676
  -3,212
  -3,807
  -4,461
  -5,173
  -5,941
  -6,766
  -7,644
  -8,576
  -9,559
  -10,593
  -11,678
  -12,813
  -13,997
  -15,231
  -16,516
  -17,853
  -19,243
  -20,687
  -22,188
  -23,748
  -25,369
  -27,054
  -28,807
  -30,631
  -32,530
New CAPEX, $m
  -856
  -1,795
  -2,105
  -2,431
  -2,767
  -3,109
  -3,451
  -3,792
  -4,128
  -4,458
  -4,780
  -5,095
  -5,403
  -5,704
  -5,999
  -6,291
  -6,580
  -6,869
  -7,160
  -7,454
  -7,753
  -8,060
  -8,377
  -8,705
  -9,046
  -9,403
  -9,776
  -10,168
  -10,579
  -11,012
  -11,469
Cash from investing activities, $m
  -1,716
  -2,903
  -3,522
  -4,211
  -4,966
  -5,785
  -6,663
  -7,599
  -8,589
  -9,631
  -10,721
  -11,861
  -13,047
  -14,280
  -15,558
  -16,884
  -18,258
  -19,682
  -21,157
  -22,685
  -24,269
  -25,913
  -27,620
  -29,392
  -31,234
  -33,151
  -35,145
  -37,222
  -39,386
  -41,643
  -43,999
Free cash flow, $m
  -231
  -3,037
  -3,981
  -4,787
  -5,673
  -6,634
  -7,667
  -8,769
  -9,937
  -11,168
  -12,459
  -13,808
  -15,214
  -16,677
  -18,196
  -19,772
  -21,405
  -23,099
  -24,854
  -26,673
  -28,560
  -30,518
  -32,550
  -34,660
  -36,854
  -39,136
  -41,511
  -43,984
  -46,561
  -49,248
  -52,051
Issuance/(repayment) of debt, $m
  -338
  1,451
  1,698
  1,961
  2,232
  2,508
  2,784
  3,059
  3,330
  3,596
  3,856
  4,110
  4,358
  4,601
  4,840
  5,075
  5,308
  5,541
  5,775
  6,013
  6,254
  6,502
  6,758
  7,022
  7,298
  7,585
  7,886
  8,202
  8,534
  8,883
  9,252
Issuance/(repurchase) of shares, $m
  376
  1,725
  3,752
  4,524
  5,373
  6,297
  7,293
  8,359
  9,490
  10,685
  11,941
  13,256
  14,629
  16,059
  17,546
  19,090
  20,692
  22,354
  24,078
  25,866
  27,720
  29,644
  31,642
  33,717
  35,874
  38,117
  40,452
  42,882
  45,415
  48,055
  50,809
Cash from financing (excl. dividends), $m  
  -65
  3,176
  5,450
  6,485
  7,605
  8,805
  10,077
  11,418
  12,820
  14,281
  15,797
  17,366
  18,987
  20,660
  22,386
  24,165
  26,000
  27,895
  29,853
  31,879
  33,974
  36,146
  38,400
  40,739
  43,172
  45,702
  48,338
  51,084
  53,949
  56,938
  60,061
Total cash flow (excl. dividends), $m
  -293
  -1,586
  -2,282
  -2,826
  -3,440
  -4,126
  -4,883
  -5,711
  -6,608
  -7,572
  -8,603
  -9,698
  -10,856
  -12,076
  -13,356
  -14,697
  -16,097
  -17,558
  -19,078
  -20,661
  -22,306
  -24,015
  -25,792
  -27,638
  -29,557
  -31,551
  -33,625
  -35,782
  -38,027
  -40,365
  -42,800
Retained Cash Flow (-), $m
  -346
  -1,256
  -1,470
  -1,698
  -1,932
  -2,171
  -2,410
  -2,648
  -2,883
  -3,113
  -3,338
  -3,558
  -3,773
  -3,983
  -4,189
  -4,393
  -4,595
  -4,797
  -5,000
  -5,205
  -5,414
  -5,629
  -5,850
  -6,079
  -6,317
  -6,566
  -6,827
  -7,100
  -7,388
  -7,690
  -8,009
Prev. year cash balance distribution, $m
 
  1,117
  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
  75.4
  48.5
  31.6
  20.9
  14.0
  9.5
  6.5
  4.5
  3.1
  2.2
  1.6
  1.1
  0.8
  0.6
  0.4
  0.3
  0.2
  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

Kinross Gold Corporation, together with its subsidiaries, engages in the acquisition, exploration, development, and production of gold properties. The company’s gold production and exploration activities are carried out principally in Canada, the United States, the Russian Federation, Brazil, Chile, Ghana, and Mauritania. It also produces and sells silver. As of December 31, 2015, its proven and probable mineral reserves included 34.0 million ounces of gold, 41.0 million ounces of silver, and 1.4 billion pounds of copper. The company was founded in 1972 and is headquartered in Toronto, Canada.

FINANCIAL RATIOS  of  Kinross Gold Corporation (K)

Valuation Ratios
P/E Ratio -46.1
Price to Sales 1.4
Price to Book 1.2
Price to Tangible Book
Price to Cash Flow 4.4
Price to Free Cash Flow 10.3
Growth Rates
Sales Growth Rate 13.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 3.9%
Cap. Spend. - 3 Yr. Gr. Rate -12.9%
Financial Strength
Quick Ratio NaN
Current Ratio 0.1
LT Debt to Equity 41.8%
Total Debt to Equity 41.8%
Interest Coverage 0
Management Effectiveness
Return On Assets 0.4%
Ret/ On Assets - 3 Yr. Avg. -7.5%
Return On Total Capital -1.8%
Ret/ On T. Cap. - 3 Yr. Avg. -10.9%
Return On Equity -2.6%
Return On Equity - 3 Yr. Avg. -15.5%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 18.2%
Gross Margin - 3 Yr. Avg. 15.5%
EBITDA Margin 25%
EBITDA Margin - 3 Yr. Avg. 5.4%
Operating Margin 1.3%
Oper. Margin - 3 Yr. Avg. -19.2%
Pre-Tax Margin -1.7%
Pre-Tax Margin - 3 Yr. Avg. -22.5%
Net Profit Margin -3%
Net Profit Margin - 3 Yr. Avg. -23%
Effective Tax Rate -83.8%
Eff/ Tax Rate - 3 Yr. Avg. -36.3%
Payout Ratio 0%

K stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the K stock intrinsic value calculation we used $4691 million for the last fiscal year's total revenue generated by Kinross Gold Corporation. The default revenue input number comes from 2016 income statement of Kinross 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 K stock valuation model: a) initial revenue growth rate of 27.9% 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 K is calculated based on our internal credit rating of Kinross 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 Kinross 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 K stock the variable cost ratio is equal to 124.6%.

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 K 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 3.9% for Kinross Gold Corporation.

Corporate tax rate of 27% is the nominal tax rate for Kinross 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 K 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 K are equal to 137%.

Life of production assets of 5.8 years is the average useful life of capital assets used in Kinross 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 K is equal to 17.7%. 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 - $5601 million for Kinross 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 1264.71 million for Kinross 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 Kinross Gold Corporation at the current share price and the inputted number of shares is $6.6 billion.


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Stock chart of K Financial statements of K
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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