Intrinsic value of Barrick Gold - ABX

Previous Close

$16.91

  Intrinsic Value

$1.45

stock screener

  Rating & Target

str. sell

-91%

  Value-price divergence*

-34%

Previous close

$16.91

 
Intrinsic value

$1.45

 
Up/down potential

-91%

 
Rating

str. sell

 
Value-price divergence*

-34%

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

We calculate the intrinsic value of ABX 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 19.2

 

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, %
  -5.22
  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
  8,558
  8,840
  9,147
  9,479
  9,835
  10,217
  10,625
  11,061
  11,524
  12,016
  12,537
  13,090
  13,674
  14,293
  14,945
  15,635
  16,362
  17,128
  17,936
  18,787
  19,683
  20,627
  21,620
  22,664
  23,763
  24,919
  26,135
  27,413
  28,757
  30,169
  31,653
Variable operating expenses, $m
 
  11,134
  11,516
  11,928
  12,372
  12,847
  13,355
  13,896
  14,472
  15,084
  15,733
  16,283
  17,011
  17,780
  18,592
  19,449
  20,353
  21,307
  22,312
  23,371
  24,485
  25,659
  26,894
  28,194
  29,561
  30,999
  32,511
  34,101
  35,773
  37,529
  39,376
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
  6,134
  11,134
  11,516
  11,928
  12,372
  12,847
  13,355
  13,896
  14,472
  15,084
  15,733
  16,283
  17,011
  17,780
  18,592
  19,449
  20,353
  21,307
  22,312
  23,371
  24,485
  25,659
  26,894
  28,194
  29,561
  30,999
  32,511
  34,101
  35,773
  37,529
  39,376
Operating income, $m
  2,424
  -2,294
  -2,369
  -2,450
  -2,537
  -2,630
  -2,729
  -2,836
  -2,949
  -3,069
  -3,196
  -3,194
  -3,336
  -3,487
  -3,646
  -3,815
  -3,992
  -4,179
  -4,376
  -4,584
  -4,802
  -5,032
  -5,275
  -5,530
  -5,798
  -6,080
  -6,376
  -6,688
  -7,016
  -7,361
  -7,723
EBITDA, $m
  3,998
  -670
  -693
  -718
  -745
  -774
  -805
  -838
  -873
  -910
  -950
  -992
  -1,036
  -1,083
  -1,132
  -1,185
  -1,240
  -1,298
  -1,359
  -1,423
  -1,491
  -1,563
  -1,638
  -1,717
  -1,800
  -1,888
  -1,980
  -2,077
  -2,179
  -2,286
  -2,398
Interest expense (income), $m
  513
  444
  476
  511
  549
  590
  634
  680
  730
  783
  840
  899
  963
  1,029
  1,100
  1,175
  1,254
  1,337
  1,425
  1,517
  1,615
  1,717
  1,825
  1,939
  2,058
  2,184
  2,317
  2,456
  2,602
  2,756
  2,917
Earnings before tax, $m
  1,778
  -2,738
  -2,845
  -2,961
  -3,086
  -3,220
  -3,363
  -3,516
  -3,679
  -3,852
  -4,036
  -4,093
  -4,299
  -4,517
  -4,747
  -4,989
  -5,246
  -5,516
  -5,801
  -6,101
  -6,417
  -6,750
  -7,100
  -7,468
  -7,856
  -8,264
  -8,693
  -9,144
  -9,618
  -10,116
  -10,640
Tax expense, $m
  917
  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
  655
  -2,738
  -2,845
  -2,961
  -3,086
  -3,220
  -3,363
  -3,516
  -3,679
  -3,852
  -4,036
  -4,093
  -4,299
  -4,517
  -4,747
  -4,989
  -5,246
  -5,516
  -5,801
  -6,101
  -6,417
  -6,750
  -7,100
  -7,468
  -7,856
  -8,264
  -8,693
  -9,144
  -9,618
  -10,116
  -10,640

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  2,389
  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
  25,264
  23,637
  24,458
  25,344
  26,297
  27,318
  28,410
  29,574
  30,812
  32,127
  33,522
  34,999
  36,563
  38,215
  39,961
  41,804
  43,747
  45,797
  47,957
  50,233
  52,629
  55,151
  57,806
  60,600
  63,539
  66,629
  69,880
  73,297
  76,889
  80,665
  84,634
Adjusted assets (=assets-cash), $m
  22,875
  23,637
  24,458
  25,344
  26,297
  27,318
  28,410
  29,574
  30,812
  32,127
  33,522
  34,999
  36,563
  38,215
  39,961
  41,804
  43,747
  45,797
  47,957
  50,233
  52,629
  55,151
  57,806
  60,600
  63,539
  66,629
  69,880
  73,297
  76,889
  80,665
  84,634
Revenue / Adjusted assets
  0.374
  0.374
  0.374
  0.374
  0.374
  0.374
  0.374
  0.374
  0.374
  0.374
  0.374
  0.374
  0.374
  0.374
  0.374
  0.374
  0.374
  0.374
  0.374
  0.374
  0.374
  0.374
  0.374
  0.374
  0.374
  0.374
  0.374
  0.374
  0.374
  0.374
  0.374
Average production assets, $m
  14,540
  15,020
  15,541
  16,104
  16,710
  17,359
  18,053
  18,792
  19,579
  20,415
  21,301
  22,240
  23,233
  24,283
  25,392
  26,563
  27,798
  29,101
  30,473
  31,919
  33,442
  35,045
  36,732
  38,507
  40,374
  42,338
  44,403
  46,575
  48,857
  51,257
  53,779
Working capital, $m
  3,055
  840
  869
  900
  934
  971
  1,009
  1,051
  1,095
  1,141
  1,191
  1,244
  1,299
  1,358
  1,420
  1,485
  1,554
  1,627
  1,704
  1,785
  1,870
  1,960
  2,054
  2,153
  2,258
  2,367
  2,483
  2,604
  2,732
  2,866
  3,007
Total debt, $m
  7,931
  8,354
  8,970
  9,635
  10,351
  11,118
  11,938
  12,812
  13,742
  14,730
  15,777
  16,887
  18,061
  19,302
  20,613
  21,997
  23,456
  24,996
  26,618
  28,327
  30,126
  32,021
  34,015
  36,113
  38,320
  40,641
  43,082
  45,648
  48,346
  51,182
  54,162
Total liabilities, $m
  17,329
  17,752
  18,368
  19,033
  19,749
  20,516
  21,336
  22,210
  23,140
  24,128
  25,175
  26,285
  27,459
  28,700
  30,011
  31,395
  32,854
  34,394
  36,016
  37,725
  39,524
  41,419
  43,413
  45,511
  47,718
  50,039
  52,480
  55,046
  57,744
  60,580
  63,560
Total equity, $m
  7,935
  5,886
  6,090
  6,311
  6,548
  6,802
  7,074
  7,364
  7,672
  8,000
  8,347
  8,715
  9,104
  9,516
  9,950
  10,409
  10,893
  11,403
  11,941
  12,508
  13,105
  13,733
  14,394
  15,089
  15,821
  16,591
  17,400
  18,251
  19,145
  20,086
  21,074
Total liabilities and equity, $m
  25,264
  23,638
  24,458
  25,344
  26,297
  27,318
  28,410
  29,574
  30,812
  32,128
  33,522
  35,000
  36,563
  38,216
  39,961
  41,804
  43,747
  45,797
  47,957
  50,233
  52,629
  55,152
  57,807
  60,600
  63,539
  66,630
  69,880
  73,297
  76,889
  80,666
  84,634
Debt-to-equity ratio
  0.999
  1.420
  1.470
  1.530
  1.580
  1.630
  1.690
  1.740
  1.790
  1.840
  1.890
  1.940
  1.980
  2.030
  2.070
  2.110
  2.150
  2.190
  2.230
  2.260
  2.300
  2.330
  2.360
  2.390
  2.420
  2.450
  2.480
  2.500
  2.530
  2.550
  2.570
Adjusted equity ratio
  0.242
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249
  0.249

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  655
  -2,738
  -2,845
  -2,961
  -3,086
  -3,220
  -3,363
  -3,516
  -3,679
  -3,852
  -4,036
  -4,093
  -4,299
  -4,517
  -4,747
  -4,989
  -5,246
  -5,516
  -5,801
  -6,101
  -6,417
  -6,750
  -7,100
  -7,468
  -7,856
  -8,264
  -8,693
  -9,144
  -9,618
  -10,116
  -10,640
Depreciation, amort., depletion, $m
  1,574
  1,624
  1,676
  1,732
  1,792
  1,856
  1,924
  1,998
  2,076
  2,158
  2,246
  2,202
  2,300
  2,404
  2,514
  2,630
  2,752
  2,881
  3,017
  3,160
  3,311
  3,470
  3,637
  3,813
  3,997
  4,192
  4,396
  4,611
  4,837
  5,075
  5,325
Funds from operations, $m
  901
  -1,114
  -1,169
  -1,229
  -1,294
  -1,364
  -1,439
  -1,518
  -1,603
  -1,694
  -1,789
  -1,891
  -1,999
  -2,112
  -2,232
  -2,359
  -2,493
  -2,635
  -2,784
  -2,941
  -3,106
  -3,280
  -3,463
  -3,656
  -3,859
  -4,072
  -4,297
  -4,533
  -4,781
  -5,041
  -5,315
Change in working capital, $m
  -1,739
  27
  29
  31
  34
  36
  39
  41
  44
  47
  50
  52
  56
  59
  62
  65
  69
  73
  77
  81
  85
  90
  94
  99
  104
  110
  115
  121
  128
  134
  141
Cash from operations, $m
  2,640
  -1,141
  -1,198
  -1,261
  -1,328
  -1,400
  -1,478
  -1,560
  -1,647
  -1,740
  -1,839
  -1,943
  -2,054
  -2,171
  -2,295
  -2,425
  -2,562
  -2,707
  -2,860
  -3,021
  -3,191
  -3,370
  -3,557
  -3,755
  -3,963
  -4,182
  -4,412
  -4,654
  -4,908
  -5,176
  -5,456
Maintenance CAPEX, $m
  0
  -1,440
  -1,487
  -1,539
  -1,594
  -1,654
  -1,719
  -1,787
  -1,861
  -1,939
  -2,021
  -2,109
  -2,202
  -2,300
  -2,404
  -2,514
  -2,630
  -2,752
  -2,881
  -3,017
  -3,160
  -3,311
  -3,470
  -3,637
  -3,813
  -3,997
  -4,192
  -4,396
  -4,611
  -4,837
  -5,075
New CAPEX, $m
  -1,126
  -480
  -521
  -563
  -606
  -649
  -694
  -740
  -787
  -836
  -886
  -939
  -993
  -1,050
  -1,109
  -1,171
  -1,235
  -1,302
  -1,373
  -1,446
  -1,523
  -1,603
  -1,687
  -1,775
  -1,867
  -1,964
  -2,065
  -2,171
  -2,283
  -2,399
  -2,522
Cash from investing activities, $m
  -412
  -1,920
  -2,008
  -2,102
  -2,200
  -2,303
  -2,413
  -2,527
  -2,648
  -2,775
  -2,907
  -3,048
  -3,195
  -3,350
  -3,513
  -3,685
  -3,865
  -4,054
  -4,254
  -4,463
  -4,683
  -4,914
  -5,157
  -5,412
  -5,680
  -5,961
  -6,257
  -6,567
  -6,894
  -7,236
  -7,597
Free cash flow, $m
  2,228
  -3,060
  -3,207
  -3,363
  -3,528
  -3,704
  -3,890
  -4,087
  -4,295
  -4,515
  -4,747
  -4,991
  -5,249
  -5,521
  -5,808
  -6,110
  -6,428
  -6,762
  -7,114
  -7,484
  -7,874
  -8,284
  -8,714
  -9,167
  -9,643
  -10,143
  -10,669
  -11,222
  -11,802
  -12,412
  -13,053
Issuance/(repayment) of debt, $m
  -2,057
  566
  616
  665
  716
  767
  820
  874
  930
  988
  1,047
  1,110
  1,174
  1,241
  1,311
  1,384
  1,460
  1,539
  1,622
  1,709
  1,800
  1,895
  1,994
  2,098
  2,207
  2,321
  2,441
  2,566
  2,698
  2,836
  2,980
Issuance/(repurchase) of shares, $m
  0
  2,935
  3,049
  3,182
  3,323
  3,474
  3,635
  3,806
  3,987
  4,179
  4,383
  4,461
  4,688
  4,928
  5,181
  5,448
  5,730
  6,026
  6,339
  6,667
  7,014
  7,378
  7,761
  8,164
  8,588
  9,034
  9,502
  9,995
  10,512
  11,057
  11,628
Cash from financing (excl. dividends), $m  
  -2,211
  3,501
  3,665
  3,847
  4,039
  4,241
  4,455
  4,680
  4,917
  5,167
  5,430
  5,571
  5,862
  6,169
  6,492
  6,832
  7,190
  7,565
  7,961
  8,376
  8,814
  9,273
  9,755
  10,262
  10,795
  11,355
  11,943
  12,561
  13,210
  13,893
  14,608
Total cash flow (excl. dividends), $m
  20
  440
  459
  484
  511
  537
  565
  593
  622
  653
  684
  579
  613
  648
  684
  722
  762
  803
  847
  892
  939
  989
  1,041
  1,095
  1,152
  1,211
  1,274
  1,339
  1,408
  1,480
  1,556
Retained Cash Flow (-), $m
  -757
  -2,935
  -3,049
  -3,182
  -3,323
  -3,474
  -3,635
  -3,806
  -3,987
  -4,179
  -4,383
  -4,461
  -4,688
  -4,928
  -5,181
  -5,448
  -5,730
  -6,026
  -6,339
  -6,667
  -7,014
  -7,378
  -7,761
  -8,164
  -8,588
  -9,034
  -9,502
  -9,995
  -10,512
  -11,057
  -11,628
Prev. year cash balance distribution, $m
 
  2,246
  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
 
  -248
  -2,591
  -2,697
  -2,813
  -2,937
  -3,070
  -3,213
  -3,365
  -3,527
  -3,699
  -3,882
  -4,075
  -4,280
  -4,497
  -4,726
  -4,968
  -5,223
  -5,492
  -5,776
  -6,074
  -6,389
  -6,720
  -7,069
  -7,436
  -7,822
  -8,228
  -8,655
  -9,104
  -9,576
  -10,073
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
 
  -238
  -2,372
  -2,347
  -2,316
  -2,276
  -2,228
  -2,170
  -2,103
  -2,026
  -1,939
  -1,843
  -1,739
  -1,627
  -1,510
  -1,387
  -1,262
  -1,136
  -1,011
  -889
  -772
  -661
  -558
  -463
  -379
  -304
  -240
  -186
  -141
  -105
  -76
Current shareholders' claim on cash, %
  100
  82.4
  67.9
  55.8
  45.9
  37.6
  30.8
  25.2
  20.6
  16.8
  13.7
  11.2
  9.2
  7.5
  6.1
  5.0
  4.1
  3.3
  2.7
  2.2
  1.8
  1.4
  1.2
  0.9
  0.8
  0.6
  0.5
  0.4
  0.3
  0.3
  0.2

Barrick Gold Corporation engages in the exploration and development of mineral properties in the United States, Canada, Australia, Argentina, Chile, Peru, the Dominican Republic, Papua New Guinea, Tanzania, Zambia, and Saudi Arabia. It primarily explores for gold, copper, and nickel deposits. The company’s principal properties include Cortez, Goldstrike, Pueblo Viejo, Lagunas Norte, and Veladero. As of December 31, 2016, it had proven and probable gold reserves of 85.9 million ounces; and 11.1 proven and probable copper reserves of billion pounds. Barrick Gold Corporation was founded in 1983 and is headquartered in Toronto, Canada.

FINANCIAL RATIOS  of  Barrick Gold (ABX)

Valuation Ratios
P/E Ratio 30.1
Price to Sales 2.3
Price to Book 2.5
Price to Tangible Book
Price to Cash Flow 7.5
Price to Free Cash Flow 13
Growth Rates
Sales Growth Rate -5.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -34.3%
Cap. Spend. - 3 Yr. Gr. Rate -27.2%
Financial Strength
Quick Ratio 17
Current Ratio 0
LT Debt to Equity 98.1%
Total Debt to Equity 99.9%
Interest Coverage 4
Management Effectiveness
Return On Assets 3.5%
Ret/ On Assets - 3 Yr. Avg. -3.2%
Return On Total Capital 4%
Ret/ On T. Cap. - 3 Yr. Avg. -7.2%
Return On Equity 8.7%
Return On Equity - 3 Yr. Avg. -16.1%
Asset Turnover 0.3
Profitability Ratios
Gross Margin 40.7%
Gross Margin - 3 Yr. Avg. 34.8%
EBITDA Margin 45.2%
EBITDA Margin - 3 Yr. Avg. 11.5%
Operating Margin 28.3%
Oper. Margin - 3 Yr. Avg. -5.3%
Pre-Tax Margin 20.8%
Pre-Tax Margin - 3 Yr. Avg. -13.3%
Net Profit Margin 7.7%
Net Profit Margin - 3 Yr. Avg. -17.4%
Effective Tax Rate 51.6%
Eff/ Tax Rate - 3 Yr. Avg. 13.7%
Payout Ratio 13.1%

ABX stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ABX stock intrinsic value calculation we used $8558 million for the last fiscal year's total revenue generated by Barrick Gold. The default revenue input number comes from 2016 income statement of Barrick Gold. 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 ABX 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 ABX is calculated based on our internal credit rating of Barrick Gold, 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 Barrick Gold.
    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 ABX stock the variable cost ratio is equal to 126%.

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 ABX 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 5.7% for Barrick Gold.

Corporate tax rate of 27% is the nominal tax rate for Barrick Gold. 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 ABX 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 ABX are equal to 169.9%.

Life of production assets of 10.1 years is the average useful life of capital assets used in Barrick Gold 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 ABX is equal to 9.5%. 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 - $7935 million for Barrick Gold - 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 1135.91 million for Barrick Gold 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 Barrick Gold at the current share price and the inputted number of shares is $19.2 billion.

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Stock chart of ABX Financial statements of ABX
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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