Intrinsic value of Yamana Gold Inc. - YRI

Previous Close

$3.37

  Intrinsic Value

$1.46

stock screener

  Rating & Target

str. sell

-57%

  Value-price divergence*

0%

Previous close

$3.37

 
Intrinsic value

$1.46

 
Up/down potential

-57%

 
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 YRI 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 3.2

 

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, %
  3.87
  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
  2,415
  2,463
  2,520
  2,585
  2,657
  2,738
  2,826
  2,923
  3,027
  3,139
  3,260
  3,388
  3,526
  3,672
  3,828
  3,993
  4,168
  4,353
  4,549
  4,756
  4,975
  5,205
  5,449
  5,705
  5,975
  6,259
  6,559
  6,874
  7,206
  7,555
  7,922
Variable operating expenses, $m
 
  5,396
  5,519
  5,659
  5,817
  5,991
  6,183
  6,391
  6,617
  6,860
  7,121
  7,343
  7,641
  7,958
  8,296
  8,653
  9,033
  9,434
  9,859
  10,307
  10,781
  11,280
  11,807
  12,363
  12,948
  13,565
  14,214
  14,897
  15,616
  16,372
  17,167
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
  3,055
  5,396
  5,519
  5,659
  5,817
  5,991
  6,183
  6,391
  6,617
  6,860
  7,121
  7,343
  7,641
  7,958
  8,296
  8,653
  9,033
  9,434
  9,859
  10,307
  10,781
  11,280
  11,807
  12,363
  12,948
  13,565
  14,214
  14,897
  15,616
  16,372
  17,167
Operating income, $m
  -640
  -2,933
  -2,999
  -3,074
  -3,159
  -3,253
  -3,356
  -3,469
  -3,590
  -3,721
  -3,862
  -3,955
  -4,115
  -4,286
  -4,468
  -4,660
  -4,864
  -5,081
  -5,309
  -5,551
  -5,806
  -6,075
  -6,359
  -6,658
  -6,973
  -7,305
  -7,655
  -8,023
  -8,410
  -8,817
  -9,245
EBITDA, $m
  -15
  -2,270
  -2,322
  -2,382
  -2,449
  -2,523
  -2,604
  -2,693
  -2,789
  -2,893
  -3,004
  -3,122
  -3,249
  -3,384
  -3,527
  -3,680
  -3,841
  -4,012
  -4,192
  -4,383
  -4,584
  -4,797
  -5,021
  -5,257
  -5,506
  -5,768
  -6,044
  -6,334
  -6,640
  -6,962
  -7,300
Interest expense (income), $m
  130
  118
  124
  131
  139
  149
  159
  170
  182
  194
  208
  223
  239
  257
  275
  294
  315
  336
  360
  384
  410
  437
  466
  496
  528
  561
  597
  634
  673
  714
  758
Earnings before tax, $m
  -832
  -3,051
  -3,123
  -3,206
  -3,299
  -3,402
  -3,515
  -3,638
  -3,772
  -3,916
  -4,070
  -4,178
  -4,355
  -4,543
  -4,742
  -4,954
  -5,179
  -5,417
  -5,669
  -5,935
  -6,216
  -6,512
  -6,824
  -7,154
  -7,501
  -7,866
  -8,251
  -8,657
  -9,083
  -9,531
  -10,003
Tax expense, $m
  -439
  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
  -416
  -3,051
  -3,123
  -3,206
  -3,299
  -3,402
  -3,515
  -3,638
  -3,772
  -3,916
  -4,070
  -4,178
  -4,355
  -4,543
  -4,742
  -4,954
  -5,179
  -5,417
  -5,669
  -5,935
  -6,216
  -6,512
  -6,824
  -7,154
  -7,501
  -7,866
  -8,251
  -8,657
  -9,083
  -9,531
  -10,003

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  234
  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
  11,892
  11,900
  12,174
  12,487
  12,838
  13,227
  13,654
  14,119
  14,622
  15,165
  15,747
  16,369
  17,034
  17,741
  18,493
  19,291
  20,136
  21,031
  21,977
  22,977
  24,033
  25,147
  26,321
  27,560
  28,864
  30,239
  31,685
  33,208
  34,811
  36,497
  38,270
Adjusted assets (=assets-cash), $m
  11,658
  11,900
  12,174
  12,487
  12,838
  13,227
  13,654
  14,119
  14,622
  15,165
  15,747
  16,369
  17,034
  17,741
  18,493
  19,291
  20,136
  21,031
  21,977
  22,977
  24,033
  25,147
  26,321
  27,560
  28,864
  30,239
  31,685
  33,208
  34,811
  36,497
  38,270
Revenue / Adjusted assets
  0.207
  0.207
  0.207
  0.207
  0.207
  0.207
  0.207
  0.207
  0.207
  0.207
  0.207
  0.207
  0.207
  0.207
  0.207
  0.207
  0.207
  0.207
  0.207
  0.207
  0.207
  0.207
  0.207
  0.207
  0.207
  0.207
  0.207
  0.207
  0.207
  0.207
  0.207
Average production assets, $m
  10,735
  10,949
  11,201
  11,489
  11,812
  12,170
  12,563
  12,991
  13,454
  13,953
  14,489
  15,062
  15,673
  16,324
  17,016
  17,749
  18,527
  19,351
  20,221
  21,141
  22,113
  23,138
  24,219
  25,358
  26,559
  27,823
  29,154
  30,555
  32,030
  33,581
  35,213
Working capital, $m
  104
  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 debt, $m
  2,359
  2,346
  2,479
  2,631
  2,802
  2,991
  3,199
  3,425
  3,669
  3,933
  4,216
  4,518
  4,841
  5,185
  5,551
  5,938
  6,349
  6,784
  7,244
  7,730
  8,243
  8,784
  9,355
  9,957
  10,591
  11,259
  11,962
  12,702
  13,481
  14,300
  15,162
Total liabilities, $m
  5,795
  5,783
  5,916
  6,068
  6,239
  6,428
  6,636
  6,862
  7,106
  7,370
  7,653
  7,955
  8,278
  8,622
  8,988
  9,375
  9,786
  10,221
  10,681
  11,167
  11,680
  12,221
  12,792
  13,394
  14,028
  14,696
  15,399
  16,139
  16,918
  17,737
  18,599
Total equity, $m
  6,096
  6,117
  6,257
  6,418
  6,599
  6,799
  7,018
  7,257
  7,516
  7,795
  8,094
  8,414
  8,755
  9,119
  9,505
  9,915
  10,350
  10,810
  11,296
  11,810
  12,353
  12,925
  13,529
  14,166
  14,836
  15,543
  16,286
  17,069
  17,893
  18,759
  19,671
Total liabilities and equity, $m
  11,891
  11,900
  12,173
  12,486
  12,838
  13,227
  13,654
  14,119
  14,622
  15,165
  15,747
  16,369
  17,033
  17,741
  18,493
  19,290
  20,136
  21,031
  21,977
  22,977
  24,033
  25,146
  26,321
  27,560
  28,864
  30,239
  31,685
  33,208
  34,811
  36,496
  38,270
Debt-to-equity ratio
  0.387
  0.380
  0.400
  0.410
  0.420
  0.440
  0.460
  0.470
  0.490
  0.500
  0.520
  0.540
  0.550
  0.570
  0.580
  0.600
  0.610
  0.630
  0.640
  0.650
  0.670
  0.680
  0.690
  0.700
  0.710
  0.720
  0.730
  0.740
  0.750
  0.760
  0.770
Adjusted equity ratio
  0.503
  0.514
  0.514
  0.514
  0.514
  0.514
  0.514
  0.514
  0.514
  0.514
  0.514
  0.514
  0.514
  0.514
  0.514
  0.514
  0.514
  0.514
  0.514
  0.514
  0.514
  0.514
  0.514
  0.514
  0.514
  0.514
  0.514
  0.514
  0.514
  0.514
  0.514

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -416
  -3,051
  -3,123
  -3,206
  -3,299
  -3,402
  -3,515
  -3,638
  -3,772
  -3,916
  -4,070
  -4,178
  -4,355
  -4,543
  -4,742
  -4,954
  -5,179
  -5,417
  -5,669
  -5,935
  -6,216
  -6,512
  -6,824
  -7,154
  -7,501
  -7,866
  -8,251
  -8,657
  -9,083
  -9,531
  -10,003
Depreciation, amort., depletion, $m
  625
  663
  677
  693
  710
  730
  752
  776
  801
  829
  858
  832
  866
  902
  940
  981
  1,024
  1,069
  1,117
  1,168
  1,222
  1,278
  1,338
  1,401
  1,467
  1,537
  1,611
  1,688
  1,770
  1,855
  1,945
Funds from operations, $m
  846
  -2,388
  -2,446
  -2,513
  -2,588
  -2,672
  -2,763
  -2,863
  -2,971
  -3,087
  -3,212
  -3,346
  -3,489
  -3,641
  -3,802
  -3,974
  -4,156
  -4,348
  -4,552
  -4,767
  -4,994
  -5,234
  -5,486
  -5,753
  -6,034
  -6,329
  -6,641
  -6,968
  -7,313
  -7,676
  -8,058
Change in working capital, $m
  -52
  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 from operations, $m
  898
  -2,388
  -2,446
  -2,513
  -2,588
  -2,672
  -2,763
  -2,863
  -2,971
  -3,087
  -3,212
  -3,346
  -3,489
  -3,641
  -3,802
  -3,974
  -4,156
  -4,348
  -4,552
  -4,767
  -4,994
  -5,234
  -5,486
  -5,753
  -6,034
  -6,329
  -6,641
  -6,968
  -7,313
  -7,676
  -8,058
Maintenance CAPEX, $m
  0
  -593
  -605
  -619
  -635
  -653
  -672
  -694
  -718
  -743
  -771
  -800
  -832
  -866
  -902
  -940
  -981
  -1,024
  -1,069
  -1,117
  -1,168
  -1,222
  -1,278
  -1,338
  -1,401
  -1,467
  -1,537
  -1,611
  -1,688
  -1,770
  -1,855
New CAPEX, $m
  -669
  -215
  -252
  -288
  -323
  -358
  -393
  -428
  -463
  -499
  -535
  -573
  -611
  -651
  -692
  -734
  -778
  -823
  -871
  -920
  -971
  -1,025
  -1,081
  -1,139
  -1,200
  -1,264
  -1,331
  -1,401
  -1,474
  -1,551
  -1,632
Cash from investing activities, $m
  -513
  -808
  -857
  -907
  -958
  -1,011
  -1,065
  -1,122
  -1,181
  -1,242
  -1,306
  -1,373
  -1,443
  -1,517
  -1,594
  -1,674
  -1,759
  -1,847
  -1,940
  -2,037
  -2,139
  -2,247
  -2,359
  -2,477
  -2,601
  -2,731
  -2,868
  -3,012
  -3,162
  -3,321
  -3,487
Free cash flow, $m
  385
  -3,196
  -3,303
  -3,420
  -3,546
  -3,682
  -3,828
  -3,985
  -4,152
  -4,329
  -4,518
  -4,719
  -4,932
  -5,157
  -5,396
  -5,648
  -5,914
  -6,195
  -6,491
  -6,804
  -7,133
  -7,480
  -7,846
  -8,230
  -8,635
  -9,061
  -9,509
  -9,980
  -10,476
  -10,997
  -11,545
Issuance/(repayment) of debt, $m
  -249
  116
  133
  152
  171
  189
  208
  226
  245
  264
  283
  303
  323
  344
  365
  388
  411
  435
  460
  486
  513
  541
  571
  602
  634
  668
  703
  740
  779
  819
  862
Issuance/(repurchase) of shares, $m
  0
  3,176
  3,264
  3,367
  3,479
  3,602
  3,734
  3,877
  4,031
  4,195
  4,370
  4,498
  4,696
  4,906
  5,129
  5,364
  5,614
  5,877
  6,155
  6,449
  6,758
  7,084
  7,428
  7,790
  8,172
  8,573
  8,995
  9,439
  9,907
  10,398
  10,915
Cash from financing (excl. dividends), $m  
  -378
  3,292
  3,397
  3,519
  3,650
  3,791
  3,942
  4,103
  4,276
  4,459
  4,653
  4,801
  5,019
  5,250
  5,494
  5,752
  6,025
  6,312
  6,615
  6,935
  7,271
  7,625
  7,999
  8,392
  8,806
  9,241
  9,698
  10,179
  10,686
  11,217
  11,777
Total cash flow (excl. dividends), $m
  8
  97
  94
  99
  104
  109
  114
  119
  124
  129
  134
  81
  87
  92
  98
  104
  111
  117
  124
  131
  138
  146
  154
  162
  171
  180
  189
  199
  209
  220
  232
Retained Cash Flow (-), $m
  445
  -3,176
  -3,264
  -3,367
  -3,479
  -3,602
  -3,734
  -3,877
  -4,031
  -4,195
  -4,370
  -4,498
  -4,696
  -4,906
  -5,129
  -5,364
  -5,614
  -5,877
  -6,155
  -6,449
  -6,758
  -7,084
  -7,428
  -7,790
  -8,172
  -8,573
  -8,995
  -9,439
  -9,907
  -10,398
  -10,915
Prev. year cash balance distribution, $m
 
  105
  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
 
  -2,975
  -3,170
  -3,268
  -3,375
  -3,493
  -3,621
  -3,759
  -3,907
  -4,066
  -4,236
  -4,417
  -4,609
  -4,814
  -5,030
  -5,260
  -5,503
  -5,760
  -6,032
  -6,318
  -6,620
  -6,939
  -7,275
  -7,628
  -8,001
  -8,393
  -8,806
  -9,240
  -9,697
  -10,178
  -10,683
Discount rate, %
 
  4.90
  5.15
  5.40
  5.67
  5.96
  6.25
  6.57
  6.89
  7.24
  7.60
  7.98
  8.38
  8.80
  9.24
  9.70
  10.19
  10.70
  11.23
  11.79
  12.38
  13.00
  13.65
  14.33
  15.05
  15.80
  16.59
  17.42
  18.29
  19.21
  20.17
PV of cash for distribution, $m
 
  -2,836
  -2,868
  -2,791
  -2,707
  -2,616
  -2,516
  -2,408
  -2,292
  -2,167
  -2,036
  -1,898
  -1,755
  -1,608
  -1,460
  -1,312
  -1,166
  -1,024
  -888
  -760
  -641
  -533
  -436
  -350
  -277
  -214
  -163
  -121
  -88
  -62
  -43
Current shareholders' claim on cash, %
  100
  56.9
  32.3
  18.3
  10.3
  5.8
  3.2
  1.8
  1.0
  0.6
  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
  0.0

Yamana Gold Inc. is a gold producer with gold production, gold development stage properties, exploration properties, and land positions throughout the Americas, including Canada, Brazil, Chile and Argentina. The Company's segments include Chapada mine in Brazil; El Penon mine in Chile; Canadian Malartic mine in Canada; Gualcamayo mine in Argentina; Minera Florida mine in Chile; Jacobina mine in Brazil; Brio Gold Inc. (Brio Gold), and Corporate and other. The Company's development projects include Cerro Moro, Argentina; Agua Rica, Argentina, and Gualcamayo, Argentina. Its exploration projects include Chapada, Brazil; El Penon, Chile; Gualcamayo, Argentina; Minera Florida, Chile; Jacobina, Brazil; Cerro Moro, Argentina; Canadian Malartic Corporation, Canada; Monument Bay, Canada; Brio Gold Exploration; Pilar, Brazil; Fazenda Brasileiro, Brazil; RDM, Brazil, and C1 Santa Luz, Brazil.

FINANCIAL RATIOS  of  Yamana Gold Inc. (YRI)

Valuation Ratios
P/E Ratio -7.7
Price to Sales 1.3
Price to Book 0.5
Price to Tangible Book
Price to Cash Flow 3.6
Price to Free Cash Flow 13.9
Growth Rates
Sales Growth Rate 3.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 40%
Cap. Spend. - 3 Yr. Gr. Rate -12.4%
Financial Strength
Quick Ratio 2
Current Ratio 0.2
LT Debt to Equity 36.6%
Total Debt to Equity 38.7%
Interest Coverage -5
Management Effectiveness
Return On Assets -2.9%
Ret/ On Assets - 3 Yr. Avg. -10.6%
Return On Total Capital -4.7%
Ret/ On T. Cap. - 3 Yr. Avg. -15.9%
Return On Equity -6.6%
Return On Equity - 3 Yr. Avg. -21.1%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 42.4%
Gross Margin - 3 Yr. Avg. 42.1%
EBITDA Margin -3.2%
EBITDA Margin - 3 Yr. Avg. -35.4%
Operating Margin -26.5%
Oper. Margin - 3 Yr. Avg. -63.2%
Pre-Tax Margin -34.5%
Pre-Tax Margin - 3 Yr. Avg. -68.6%
Net Profit Margin -17.2%
Net Profit Margin - 3 Yr. Avg. -71.8%
Effective Tax Rate 52.8%
Eff/ Tax Rate - 3 Yr. Avg. 10.6%
Payout Ratio -9.1%

YRI stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the YRI stock intrinsic value calculation we used $2415 million for the last fiscal year's total revenue generated by Yamana Gold Inc.. The default revenue input number comes from 2016 income statement of Yamana Gold 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 YRI 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 4.9%, whose default value for YRI is calculated based on our internal credit rating of Yamana Gold 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 Yamana Gold 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 YRI stock the variable cost ratio is equal to 219.1%.

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 YRI 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 5.3% for Yamana Gold Inc..

Corporate tax rate of 27% is the nominal tax rate for Yamana Gold 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 YRI 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 YRI are equal to 444.5%.

Life of production assets of 18.1 years is the average useful life of capital assets used in Yamana Gold 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 YRI is equal to 0%. 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 - $6096 million for Yamana Gold 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 947.522 million for Yamana Gold 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 Yamana Gold Inc. at the current share price and the inputted number of shares is $3.2 billion.

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Financial statements of YRI
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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