Intrinsic value of Yamana Gold - AUY

Previous Close

$2.63

  Intrinsic Value

$1.08

stock screener

  Rating & Target

str. sell

-59%

  Value-price divergence*

+31%

Previous close

$2.63

 
Intrinsic value

$1.08

 
Up/down potential

-59%

 
Rating

str. sell

 
Value-price divergence*

+31%

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

We calculate the intrinsic value of AUY 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 2.5

 

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, %
  3.89
  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
  1,788
  1,824
  1,866
  1,914
  1,967
  2,027
  2,093
  2,164
  2,241
  2,324
  2,413
  2,509
  2,611
  2,719
  2,834
  2,956
  3,086
  3,223
  3,368
  3,521
  3,683
  3,854
  4,034
  4,224
  4,424
  4,634
  4,856
  5,089
  5,335
  5,593
  5,865
Variable operating expenses, $m
 
  3,995
  4,086
  4,190
  4,306
  4,436
  4,578
  4,732
  4,899
  5,079
  5,273
  5,437
  5,657
  5,892
  6,142
  6,407
  6,687
  6,985
  7,299
  7,631
  7,982
  8,352
  8,742
  9,153
  9,586
  10,043
  10,523
  11,029
  11,561
  12,121
  12,710
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
  2,261
  3,995
  4,086
  4,190
  4,306
  4,436
  4,578
  4,732
  4,899
  5,079
  5,273
  5,437
  5,657
  5,892
  6,142
  6,407
  6,687
  6,985
  7,299
  7,631
  7,982
  8,352
  8,742
  9,153
  9,586
  10,043
  10,523
  11,029
  11,561
  12,121
  12,710
Operating income, $m
  -474
  -2,171
  -2,220
  -2,276
  -2,339
  -2,409
  -2,485
  -2,568
  -2,658
  -2,755
  -2,859
  -2,928
  -3,047
  -3,173
  -3,308
  -3,450
  -3,602
  -3,762
  -3,931
  -4,110
  -4,299
  -4,498
  -4,708
  -4,929
  -5,163
  -5,409
  -5,667
  -5,940
  -6,226
  -6,528
  -6,845
EBITDA, $m
  -12
  -1,681
  -1,719
  -1,764
  -1,813
  -1,868
  -1,928
  -1,994
  -2,065
  -2,142
  -2,224
  -2,312
  -2,406
  -2,506
  -2,612
  -2,724
  -2,844
  -2,970
  -3,104
  -3,245
  -3,394
  -3,552
  -3,717
  -3,892
  -4,077
  -4,271
  -4,475
  -4,690
  -4,916
  -5,155
  -5,405
Interest expense (income), $m
  96
  88
  92
  97
  103
  110
  117
  126
  134
  144
  154
  165
  177
  190
  203
  218
  233
  249
  266
  284
  303
  323
  345
  367
  391
  416
  442
  469
  498
  529
  561
Earnings before tax, $m
  -616
  -2,259
  -2,312
  -2,373
  -2,442
  -2,519
  -2,602
  -2,694
  -2,793
  -2,899
  -3,014
  -3,093
  -3,224
  -3,363
  -3,511
  -3,668
  -3,835
  -4,011
  -4,197
  -4,394
  -4,602
  -4,821
  -5,053
  -5,296
  -5,553
  -5,824
  -6,109
  -6,409
  -6,725
  -7,057
  -7,406
Tax expense, $m
  -325
  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
  -308
  -2,259
  -2,312
  -2,373
  -2,442
  -2,519
  -2,602
  -2,694
  -2,793
  -2,899
  -3,014
  -3,093
  -3,224
  -3,363
  -3,511
  -3,668
  -3,835
  -4,011
  -4,197
  -4,394
  -4,602
  -4,821
  -5,053
  -5,296
  -5,553
  -5,824
  -6,109
  -6,409
  -6,725
  -7,057
  -7,406

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  173
  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
  8,802
  8,810
  9,013
  9,245
  9,505
  9,793
  10,109
  10,453
  10,826
  11,228
  11,658
  12,119
  12,611
  13,135
  13,692
  14,282
  14,908
  15,571
  16,271
  17,012
  17,793
  18,618
  19,488
  20,405
  21,370
  22,388
  23,459
  24,587
  25,773
  27,021
  28,334
Adjusted assets (=assets-cash), $m
  8,629
  8,810
  9,013
  9,245
  9,505
  9,793
  10,109
  10,453
  10,826
  11,228
  11,658
  12,119
  12,611
  13,135
  13,692
  14,282
  14,908
  15,571
  16,271
  17,012
  17,793
  18,618
  19,488
  20,405
  21,370
  22,388
  23,459
  24,587
  25,773
  27,021
  28,334
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
  7,945
  8,105
  8,291
  8,504
  8,744
  9,009
  9,299
  9,616
  9,959
  10,328
  10,725
  11,149
  11,601
  12,083
  12,595
  13,138
  13,714
  14,324
  14,968
  15,649
  16,368
  17,127
  17,927
  18,770
  19,659
  20,595
  21,580
  22,617
  23,709
  24,857
  26,065
Working capital, $m
  77
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
Total debt, $m
  1,746
  1,738
  1,836
  1,949
  2,075
  2,215
  2,369
  2,536
  2,717
  2,913
  3,122
  3,346
  3,585
  3,840
  4,110
  4,397
  4,701
  5,023
  5,364
  5,724
  6,103
  6,504
  6,927
  7,373
  7,842
  8,337
  8,857
  9,405
  9,982
  10,588
  11,226
Total liabilities, $m
  4,290
  4,282
  4,380
  4,493
  4,619
  4,759
  4,913
  5,080
  5,261
  5,457
  5,666
  5,890
  6,129
  6,384
  6,654
  6,941
  7,245
  7,567
  7,908
  8,268
  8,647
  9,048
  9,471
  9,917
  10,386
  10,881
  11,401
  11,949
  12,526
  13,132
  13,770
Total equity, $m
  4,512
  4,529
  4,633
  4,752
  4,885
  5,034
  5,196
  5,373
  5,565
  5,771
  5,992
  6,229
  6,482
  6,751
  7,037
  7,341
  7,663
  8,003
  8,363
  8,744
  9,146
  9,570
  10,017
  10,488
  10,984
  11,507
  12,058
  12,637
  13,247
  13,889
  14,564
Total liabilities and equity, $m
  8,802
  8,811
  9,013
  9,245
  9,504
  9,793
  10,109
  10,453
  10,826
  11,228
  11,658
  12,119
  12,611
  13,135
  13,691
  14,282
  14,908
  15,570
  16,271
  17,012
  17,793
  18,618
  19,488
  20,405
  21,370
  22,388
  23,459
  24,586
  25,773
  27,021
  28,334
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
  -308
  -2,259
  -2,312
  -2,373
  -2,442
  -2,519
  -2,602
  -2,694
  -2,793
  -2,899
  -3,014
  -3,093
  -3,224
  -3,363
  -3,511
  -3,668
  -3,835
  -4,011
  -4,197
  -4,394
  -4,602
  -4,821
  -5,053
  -5,296
  -5,553
  -5,824
  -6,109
  -6,409
  -6,725
  -7,057
  -7,406
Depreciation, amort., depletion, $m
  462
  491
  501
  513
  526
  541
  557
  574
  593
  613
  635
  616
  641
  668
  696
  726
  758
  791
  827
  865
  904
  946
  990
  1,037
  1,086
  1,138
  1,192
  1,250
  1,310
  1,373
  1,440
Funds from operations, $m
  626
  -1,768
  -1,811
  -1,861
  -1,916
  -1,978
  -2,046
  -2,120
  -2,200
  -2,286
  -2,378
  -2,477
  -2,583
  -2,696
  -2,815
  -2,942
  -3,077
  -3,219
  -3,370
  -3,529
  -3,698
  -3,875
  -4,062
  -4,259
  -4,467
  -4,686
  -4,917
  -5,160
  -5,415
  -5,684
  -5,966
Change in working capital, $m
  -39
  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
  665
  -1,768
  -1,811
  -1,861
  -1,916
  -1,978
  -2,046
  -2,120
  -2,200
  -2,286
  -2,378
  -2,477
  -2,583
  -2,696
  -2,815
  -2,942
  -3,077
  -3,219
  -3,370
  -3,529
  -3,697
  -3,875
  -4,062
  -4,259
  -4,467
  -4,686
  -4,917
  -5,159
  -5,415
  -5,683
  -5,966
Maintenance CAPEX, $m
  0
  -439
  -448
  -458
  -470
  -483
  -498
  -514
  -531
  -550
  -571
  -593
  -616
  -641
  -668
  -696
  -726
  -758
  -791
  -827
  -865
  -904
  -946
  -990
  -1,037
  -1,086
  -1,138
  -1,192
  -1,250
  -1,310
  -1,373
New CAPEX, $m
  -495
  -160
  -186
  -213
  -239
  -265
  -291
  -317
  -343
  -369
  -396
  -424
  -452
  -482
  -512
  -543
  -576
  -609
  -645
  -681
  -719
  -759
  -800
  -843
  -889
  -936
  -985
  -1,037
  -1,091
  -1,148
  -1,208
Cash from investing activities, $m
  -380
  -599
  -634
  -671
  -709
  -748
  -789
  -831
  -874
  -919
  -967
  -1,017
  -1,068
  -1,123
  -1,180
  -1,239
  -1,302
  -1,367
  -1,436
  -1,508
  -1,584
  -1,663
  -1,746
  -1,833
  -1,926
  -2,022
  -2,123
  -2,229
  -2,341
  -2,458
  -2,581
Free cash flow, $m
  285
  -2,367
  -2,446
  -2,532
  -2,625
  -2,726
  -2,834
  -2,950
  -3,074
  -3,205
  -3,345
  -3,494
  -3,651
  -3,818
  -3,995
  -4,181
  -4,378
  -4,586
  -4,806
  -5,037
  -5,281
  -5,538
  -5,808
  -6,093
  -6,393
  -6,708
  -7,040
  -7,389
  -7,756
  -8,141
  -8,547
Issuance/(repayment) of debt, $m
  -184
  87
  98
  113
  126
  140
  154
  167
  181
  195
  209
  224
  239
  255
  271
  287
  304
  322
  341
  360
  380
  401
  423
  446
  469
  494
  521
  548
  577
  607
  638
Issuance/(repurchase) of shares, $m
  0
  2,353
  2,416
  2,493
  2,576
  2,667
  2,765
  2,871
  2,984
  3,106
  3,235
  3,330
  3,477
  3,632
  3,797
  3,972
  4,156
  4,351
  4,557
  4,774
  5,004
  5,245
  5,500
  5,768
  6,050
  6,347
  6,660
  6,989
  7,335
  7,698
  8,081
Cash from financing (excl. dividends), $m  
  -280
  2,440
  2,514
  2,606
  2,702
  2,807
  2,919
  3,038
  3,165
  3,301
  3,444
  3,554
  3,716
  3,887
  4,068
  4,259
  4,460
  4,673
  4,898
  5,134
  5,384
  5,646
  5,923
  6,214
  6,519
  6,841
  7,181
  7,537
  7,912
  8,305
  8,719
Total cash flow (excl. dividends), $m
  6
  73
  69
  73
  77
  81
  84
  88
  92
  95
  99
  60
  64
  69
  73
  77
  82
  87
  92
  97
  102
  108
  114
  120
  127
  133
  140
  148
  156
  164
  172
Retained Cash Flow (-), $m
  329
  -2,353
  -2,416
  -2,493
  -2,576
  -2,667
  -2,765
  -2,871
  -2,984
  -3,106
  -3,235
  -3,330
  -3,477
  -3,632
  -3,797
  -3,972
  -4,156
  -4,351
  -4,557
  -4,774
  -5,004
  -5,245
  -5,500
  -5,768
  -6,050
  -6,347
  -6,660
  -6,989
  -7,335
  -7,698
  -8,081
Prev. year cash balance distribution, $m
 
  78
  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
 
  -2,202
  -2,347
  -2,419
  -2,499
  -2,586
  -2,681
  -2,783
  -2,892
  -3,010
  -3,136
  -3,270
  -3,412
  -3,564
  -3,724
  -3,894
  -4,074
  -4,264
  -4,465
  -4,677
  -4,901
  -5,137
  -5,386
  -5,648
  -5,923
  -6,214
  -6,519
  -6,841
  -7,179
  -7,535
  -7,909
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
 
  -2,099
  -2,123
  -2,066
  -2,004
  -1,937
  -1,863
  -1,783
  -1,697
  -1,605
  -1,507
  -1,405
  -1,299
  -1,191
  -1,081
  -971
  -863
  -758
  -657
  -563
  -475
  -394
  -323
  -259
  -205
  -159
  -120
  -89
  -65
  -46
  -32
Current shareholders' claim on cash, %
  100
  56.9
  32.3
  18.2
  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 (AUY)

Valuation Ratios
P/E Ratio -8.1
Price to Sales 1.4
Price to Book 0.6
Price to Tangible Book
Price to Cash Flow 3.7
Price to Free Cash Flow 14.7
Growth Rates
Sales Growth Rate 3.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 39.8%
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. 42.2%
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%

AUY stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the AUY stock intrinsic value calculation we used $1788 million for the last fiscal year's total revenue generated by Yamana Gold. The default revenue input number comes from 2016 income statement of Yamana 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 AUY 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 AUY is calculated based on our internal credit rating of Yamana 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 Yamana 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 AUY 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 AUY 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.

Corporate tax rate of 27% is the nominal tax rate for Yamana 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 AUY 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 AUY are equal to 444.4%.

Life of production assets of 18.1 years is the average useful life of capital assets used in Yamana 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 AUY is equal to -0.1%. 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 - $4512 million for Yamana 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 949.091 million for Yamana 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 Yamana Gold at the current share price and the inputted number of shares is $2.5 billion.

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Financial statements of AUY
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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