Intrinsic value of Barrick Gold - ABX

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$16.72

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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$16.72

 
Intrinsic value

$1.40

 
Up/down potential

-92%

 
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 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 19.6

 

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, %
  -5.22
  3.60
  3.74
  3.87
  3.98
  4.08
  4.17
  4.26
  4.33
  4.40
  4.46
  4.51
  4.56
  4.60
  4.64
  4.68
  4.71
  4.74
  4.77
  4.79
  4.81
  4.83
  4.85
  4.86
  4.88
  4.89
  4.90
  4.91
  4.92
  4.93
  4.93
Revenue, $m
  8,558
  8,866
  9,198
  9,553
  9,933
  10,339
  10,770
  11,229
  11,715
  12,230
  12,775
  13,352
  13,961
  14,603
  15,282
  15,997
  16,750
  17,545
  18,381
  19,261
  20,188
  21,163
  22,189
  23,267
  24,402
  25,595
  26,849
  28,167
  29,552
  31,008
  32,538
Variable operating expenses, $m
 
  11,166
  11,579
  12,021
  12,494
  12,998
  13,535
  14,105
  14,710
  15,351
  16,029
  16,609
  17,367
  18,166
  19,010
  19,900
  20,837
  21,825
  22,865
  23,961
  25,113
  26,326
  27,602
  28,944
  30,356
  31,839
  33,399
  35,039
  36,763
  38,574
  40,477
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
  11,166
  11,579
  12,021
  12,494
  12,998
  13,535
  14,105
  14,710
  15,351
  16,029
  16,609
  17,367
  18,166
  19,010
  19,900
  20,837
  21,825
  22,865
  23,961
  25,113
  26,326
  27,602
  28,944
  30,356
  31,839
  33,399
  35,039
  36,763
  38,574
  40,477
Operating income, $m
  2,424
  -2,300
  -2,381
  -2,468
  -2,561
  -2,660
  -2,765
  -2,877
  -2,995
  -3,121
  -3,254
  -3,258
  -3,406
  -3,563
  -3,728
  -3,903
  -4,087
  -4,281
  -4,485
  -4,699
  -4,925
  -5,163
  -5,414
  -5,677
  -5,954
  -6,245
  -6,551
  -6,872
  -7,210
  -7,565
  -7,939
EBITDA, $m
  3,998
  -672
  -697
  -724
  -753
  -783
  -816
  -851
  -888
  -927
  -968
  -1,012
  -1,058
  -1,106
  -1,158
  -1,212
  -1,269
  -1,329
  -1,393
  -1,459
  -1,529
  -1,603
  -1,681
  -1,763
  -1,849
  -1,939
  -2,034
  -2,134
  -2,239
  -2,349
  -2,465
Interest expense (income), $m
  513
  444
  479
  517
  558
  601
  648
  697
  750
  805
  864
  927
  993
  1,062
  1,136
  1,213
  1,295
  1,382
  1,472
  1,568
  1,669
  1,775
  1,887
  2,004
  2,127
  2,257
  2,394
  2,537
  2,688
  2,847
  3,013
Earnings before tax, $m
  1,778
  -2,744
  -2,860
  -2,985
  -3,118
  -3,261
  -3,413
  -3,574
  -3,745
  -3,926
  -4,118
  -4,184
  -4,399
  -4,625
  -4,864
  -5,116
  -5,382
  -5,662
  -5,957
  -6,267
  -6,594
  -6,938
  -7,300
  -7,681
  -8,081
  -8,502
  -8,944
  -9,410
  -9,898
  -10,412
  -10,952
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
  -2,744
  -2,860
  -2,985
  -3,118
  -3,261
  -3,413
  -3,574
  -3,745
  -3,926
  -4,118
  -4,184
  -4,399
  -4,625
  -4,864
  -5,116
  -5,382
  -5,662
  -5,957
  -6,267
  -6,594
  -6,938
  -7,300
  -7,681
  -8,081
  -8,502
  -8,944
  -9,410
  -9,898
  -10,412
  -10,952

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
  23,706
  24,593
  25,543
  26,560
  27,644
  28,798
  30,023
  31,323
  32,701
  34,158
  35,700
  37,328
  39,047
  40,860
  42,772
  44,787
  46,911
  49,147
  51,501
  53,978
  56,585
  59,328
  62,213
  65,246
  68,435
  71,788
  75,313
  79,017
  82,910
  87,001
Adjusted assets (=assets-cash), $m
  22,875
  23,706
  24,593
  25,543
  26,560
  27,644
  28,798
  30,023
  31,323
  32,701
  34,158
  35,700
  37,328
  39,047
  40,860
  42,772
  44,787
  46,911
  49,147
  51,501
  53,978
  56,585
  59,328
  62,213
  65,246
  68,435
  71,788
  75,313
  79,017
  82,910
  87,001
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
  15,063
  15,627
  16,231
  16,877
  17,566
  18,299
  19,078
  19,904
  20,779
  21,705
  22,684
  23,719
  24,811
  25,963
  27,179
  28,459
  29,808
  31,229
  32,725
  34,299
  35,956
  37,699
  39,531
  41,459
  43,486
  45,616
  47,856
  50,210
  52,683
  55,283
Working capital, $m
  3,055
  842
  874
  908
  944
  982
  1,023
  1,067
  1,113
  1,162
  1,214
  1,268
  1,326
  1,387
  1,452
  1,520
  1,591
  1,667
  1,746
  1,830
  1,918
  2,010
  2,108
  2,210
  2,318
  2,432
  2,551
  2,676
  2,807
  2,946
  3,091
Total debt, $m
  7,931
  8,405
  9,071
  9,785
  10,549
  11,363
  12,229
  13,149
  14,126
  15,160
  16,255
  17,412
  18,635
  19,926
  21,288
  22,724
  24,237
  25,832
  27,511
  29,279
  31,140
  33,098
  35,157
  37,324
  39,602
  41,997
  44,515
  47,162
  49,944
  52,868
  55,940
Total liabilities, $m
  17,329
  17,803
  18,469
  19,183
  19,947
  20,761
  21,627
  22,547
  23,524
  24,558
  25,653
  26,810
  28,033
  29,324
  30,686
  32,122
  33,635
  35,230
  36,909
  38,677
  40,538
  42,496
  44,555
  46,722
  49,000
  51,395
  53,913
  56,560
  59,342
  62,266
  65,338
Total equity, $m
  7,935
  5,903
  6,124
  6,360
  6,613
  6,883
  7,171
  7,476
  7,800
  8,143
  8,505
  8,889
  9,295
  9,723
  10,174
  10,650
  11,152
  11,681
  12,238
  12,824
  13,441
  14,090
  14,773
  15,491
  16,246
  17,040
  17,875
  18,753
  19,675
  20,645
  21,663
Total liabilities and equity, $m
  25,264
  23,706
  24,593
  25,543
  26,560
  27,644
  28,798
  30,023
  31,324
  32,701
  34,158
  35,699
  37,328
  39,047
  40,860
  42,772
  44,787
  46,911
  49,147
  51,501
  53,979
  56,586
  59,328
  62,213
  65,246
  68,435
  71,788
  75,313
  79,017
  82,911
  87,001
Debt-to-equity ratio
  0.999
  1.420
  1.480
  1.540
  1.600
  1.650
  1.710
  1.760
  1.810
  1.860
  1.910
  1.960
  2.000
  2.050
  2.090
  2.130
  2.170
  2.210
  2.250
  2.280
  2.320
  2.350
  2.380
  2.410
  2.440
  2.460
  2.490
  2.510
  2.540
  2.560
  2.580
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
  -2,744
  -2,860
  -2,985
  -3,118
  -3,261
  -3,413
  -3,574
  -3,745
  -3,926
  -4,118
  -4,184
  -4,399
  -4,625
  -4,864
  -5,116
  -5,382
  -5,662
  -5,957
  -6,267
  -6,594
  -6,938
  -7,300
  -7,681
  -8,081
  -8,502
  -8,944
  -9,410
  -9,898
  -10,412
  -10,952
Depreciation, amort., depletion, $m
  1,574
  1,629
  1,684
  1,744
  1,808
  1,876
  1,949
  2,026
  2,108
  2,194
  2,286
  2,246
  2,348
  2,457
  2,571
  2,691
  2,818
  2,951
  3,092
  3,240
  3,396
  3,560
  3,733
  3,914
  4,105
  4,306
  4,516
  4,738
  4,971
  5,216
  5,474
Funds from operations, $m
  901
  -1,116
  -1,176
  -1,241
  -1,310
  -1,385
  -1,464
  -1,548
  -1,637
  -1,732
  -1,832
  -1,938
  -2,050
  -2,169
  -2,294
  -2,425
  -2,564
  -2,711
  -2,865
  -3,027
  -3,198
  -3,378
  -3,568
  -3,767
  -3,976
  -4,196
  -4,428
  -4,671
  -4,927
  -5,196
  -5,479
Change in working capital, $m
  -1,739
  29
  32
  34
  36
  39
  41
  44
  46
  49
  52
  55
  58
  61
  64
  68
  72
  75
  79
  84
  88
  93
  97
  102
  108
  113
  119
  125
  132
  138
  145
Cash from operations, $m
  2,640
  -1,310
  -1,207
  -1,275
  -1,346
  -1,423
  -1,505
  -1,591
  -1,683
  -1,781
  -1,884
  -1,993
  -2,108
  -2,230
  -2,358
  -2,493
  -2,636
  -2,786
  -2,944
  -3,111
  -3,286
  -3,471
  -3,665
  -3,869
  -4,084
  -4,310
  -4,547
  -4,797
  -5,059
  -5,334
  -5,624
Maintenance CAPEX, $m
  0
  -1,440
  -1,491
  -1,547
  -1,607
  -1,671
  -1,739
  -1,812
  -1,889
  -1,971
  -2,057
  -2,149
  -2,246
  -2,348
  -2,457
  -2,571
  -2,691
  -2,818
  -2,951
  -3,092
  -3,240
  -3,396
  -3,560
  -3,733
  -3,914
  -4,105
  -4,306
  -4,516
  -4,738
  -4,971
  -5,216
New CAPEX, $m
  -1,126
  -523
  -563
  -604
  -646
  -689
  -733
  -779
  -826
  -875
  -926
  -979
  -1,035
  -1,092
  -1,152
  -1,215
  -1,281
  -1,349
  -1,421
  -1,496
  -1,574
  -1,657
  -1,743
  -1,833
  -1,928
  -2,027
  -2,131
  -2,240
  -2,354
  -2,474
  -2,599
Cash from investing activities, $m
  -412
  -1,963
  -2,054
  -2,151
  -2,253
  -2,360
  -2,472
  -2,591
  -2,715
  -2,846
  -2,983
  -3,128
  -3,281
  -3,440
  -3,609
  -3,786
  -3,972
  -4,167
  -4,372
  -4,588
  -4,814
  -5,053
  -5,303
  -5,566
  -5,842
  -6,132
  -6,437
  -6,756
  -7,092
  -7,445
  -7,815
Free cash flow, $m
  2,228
  -3,273
  -3,262
  -3,426
  -3,599
  -3,783
  -3,977
  -4,182
  -4,398
  -4,627
  -4,867
  -5,121
  -5,389
  -5,670
  -5,967
  -6,279
  -6,607
  -6,953
  -7,317
  -7,699
  -8,101
  -8,523
  -8,968
  -9,435
  -9,925
  -10,441
  -10,983
  -11,553
  -12,151
  -12,779
  -13,440
Issuance/(repayment) of debt, $m
  -2,057
  617
  666
  714
  763
  814
  866
  920
  976
  1,034
  1,095
  1,157
  1,223
  1,291
  1,362
  1,436
  1,514
  1,595
  1,679
  1,768
  1,861
  1,958
  2,060
  2,166
  2,278
  2,395
  2,518
  2,647
  2,782
  2,924
  3,072
Issuance/(repurchase) of shares, $m
  0
  624
  2,817
  2,949
  3,089
  3,239
  3,398
  3,567
  3,746
  3,935
  4,136
  4,348
  4,571
  4,807
  5,056
  5,319
  5,596
  5,887
  6,194
  6,517
  6,857
  7,215
  7,591
  7,987
  8,403
  8,840
  9,300
  9,783
  10,291
  10,825
  11,386
Cash from financing (excl. dividends), $m  
  -2,211
  1,241
  3,483
  3,663
  3,852
  4,053
  4,264
  4,487
  4,722
  4,969
  5,231
  5,505
  5,794
  6,098
  6,418
  6,755
  7,110
  7,482
  7,873
  8,285
  8,718
  9,173
  9,651
  10,153
  10,681
  11,235
  11,818
  12,430
  13,073
  13,749
  14,458
Total cash flow (excl. dividends), $m
  20
  -2,656
  -2,596
  -2,712
  -2,836
  -2,969
  -3,110
  -3,261
  -3,422
  -3,592
  -3,773
  -3,964
  -4,166
  -4,379
  -4,605
  -4,843
  -5,094
  -5,359
  -5,637
  -5,931
  -6,240
  -6,566
  -6,908
  -7,268
  -7,647
  -8,046
  -8,465
  -8,906
  -9,369
  -9,856
  -10,367
Retained Cash Flow (-), $m
  -757
  -214
  -221
  -237
  -253
  -270
  -287
  -305
  -324
  -343
  -363
  -384
  -405
  -428
  -452
  -476
  -502
  -529
  -557
  -586
  -617
  -649
  -683
  -718
  -755
  -794
  -835
  -878
  -922
  -969
  -1,019
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
 
  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
  95.8
  80.3
  67.2
  56.2
  46.9
  39.1
  32.5
  27.1
  22.5
  18.6
  15.4
  12.8
  10.6
  8.7
  7.2
  6.0
  4.9
  4.0
  3.3
  2.7
  2.2
  1.8
  1.5
  1.2
  1.0
  0.8
  0.7
  0.6
  0.5
  0.4

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 29.7
Price to Sales 2.3
Price to Book 2.5
Price to Tangible Book
Price to Cash Flow 7.4
Price to Free Cash Flow 12.9
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 3.6% 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 1173.78 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 $19.6 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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