Intrinsic value of Eldorado Gold - EGO

Previous Close

$1.87

  Intrinsic Value

$1.26

stock screener

  Rating & Target

sell

-33%

  Value-price divergence*

-13%

Previous close

$1.87

 
Intrinsic value

$1.26

 
Up/down potential

-33%

 
Rating

sell

 
Value-price divergence*

-13%

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

We calculate the intrinsic value of EGO 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 1.3

 

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, %
  -9.60
  17.90
  16.61
  15.45
  14.40
  13.46
  12.62
  11.86
  11.17
  10.55
  10.00
  9.50
  9.05
  8.64
  8.28
  7.95
  7.66
  7.39
  7.15
  6.94
  6.74
  6.57
  6.41
  6.27
  6.14
  6.03
  5.93
  5.83
  5.75
  5.68
  5.61
Revenue, $m
  433
  511
  595
  687
  786
  892
  1,005
  1,124
  1,249
  1,381
  1,519
  1,664
  1,814
  1,971
  2,134
  2,304
  2,480
  2,663
  2,854
  3,052
  3,258
  3,472
  3,694
  3,926
  4,167
  4,418
  4,680
  4,953
  5,238
  5,535
  5,845
Variable operating expenses, $m
 
  2,463
  2,872
  3,315
  3,793
  4,304
  4,847
  5,421
  6,027
  6,663
  7,329
  8,025
  8,751
  9,507
  10,295
  11,113
  11,964
  12,848
  13,767
  14,722
  15,715
  16,747
  17,820
  18,938
  20,101
  21,313
  22,576
  23,893
  25,267
  26,701
  28,198
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
  366
  2,463
  2,872
  3,315
  3,793
  4,304
  4,847
  5,421
  6,027
  6,663
  7,329
  8,025
  8,751
  9,507
  10,295
  11,113
  11,964
  12,848
  13,767
  14,722
  15,715
  16,747
  17,820
  18,938
  20,101
  21,313
  22,576
  23,893
  25,267
  26,701
  28,198
Operating income, $m
  67
  -1,952
  -2,276
  -2,628
  -3,007
  -3,411
  -3,842
  -4,297
  -4,777
  -5,282
  -5,810
  -6,361
  -6,937
  -7,537
  -8,161
  -8,809
  -9,484
  -10,185
  -10,913
  -11,670
  -12,457
  -13,275
  -14,126
  -15,012
  -15,934
  -16,895
  -17,896
  -18,940
  -20,029
  -21,166
  -22,353
EBITDA, $m
  142
  -1,787
  -2,084
  -2,406
  -2,753
  -3,123
  -3,518
  -3,935
  -4,374
  -4,836
  -5,319
  -5,824
  -6,351
  -6,900
  -7,471
  -8,066
  -8,683
  -9,325
  -9,992
  -10,685
  -11,405
  -12,154
  -12,933
  -13,744
  -14,589
  -15,468
  -16,385
  -17,341
  -18,338
  -19,379
  -20,465
Interest expense (income), $m
  34
  34
  48
  63
  79
  96
  115
  134
  155
  177
  201
  225
  250
  277
  304
  333
  362
  393
  426
  459
  494
  530
  568
  607
  647
  690
  734
  780
  828
  878
  930
Earnings before tax, $m
  49
  -1,987
  -2,324
  -2,691
  -3,085
  -3,508
  -3,957
  -4,432
  -4,933
  -5,459
  -6,010
  -6,586
  -7,187
  -7,813
  -8,465
  -9,142
  -9,846
  -10,578
  -11,339
  -12,129
  -12,951
  -13,805
  -14,694
  -15,619
  -16,582
  -17,585
  -18,630
  -19,720
  -20,857
  -22,044
  -23,283
Tax expense, $m
  57
  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
  -344
  -1,987
  -2,324
  -2,691
  -3,085
  -3,508
  -3,957
  -4,432
  -4,933
  -5,459
  -6,010
  -6,586
  -7,187
  -7,813
  -8,465
  -9,142
  -9,846
  -10,578
  -11,339
  -12,129
  -12,951
  -13,805
  -14,694
  -15,619
  -16,582
  -17,585
  -18,630
  -19,720
  -20,857
  -22,044
  -23,283

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $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
Total assets, $m
  4,798
  4,558
  5,315
  6,136
  7,020
  7,965
  8,970
  10,034
  11,155
  12,332
  13,565
  14,853
  16,197
  17,597
  19,054
  20,569
  22,144
  23,780
  25,481
  27,248
  29,085
  30,996
  32,983
  35,051
  37,205
  39,448
  41,785
  44,223
  46,766
  49,420
  52,191
Adjusted assets (=assets-cash), $m
  3,881
  4,558
  5,315
  6,136
  7,020
  7,965
  8,970
  10,034
  11,155
  12,332
  13,565
  14,853
  16,197
  17,597
  19,054
  20,569
  22,144
  23,780
  25,481
  27,248
  29,085
  30,996
  32,983
  35,051
  37,205
  39,448
  41,785
  44,223
  46,766
  49,420
  52,191
Revenue / Adjusted assets
  0.112
  0.112
  0.112
  0.112
  0.112
  0.112
  0.112
  0.112
  0.112
  0.112
  0.112
  0.112
  0.112
  0.112
  0.112
  0.112
  0.112
  0.112
  0.112
  0.112
  0.112
  0.112
  0.112
  0.112
  0.112
  0.112
  0.112
  0.112
  0.112
  0.112
  0.112
Average production assets, $m
  4,195
  4,945
  5,767
  6,658
  7,617
  8,642
  9,732
  10,886
  12,102
  13,379
  14,717
  16,115
  17,573
  19,092
  20,672
  22,316
  24,025
  25,800
  27,645
  29,563
  31,556
  33,629
  35,785
  38,029
  40,365
  42,799
  45,335
  47,979
  50,738
  53,618
  56,624
Working capital, $m
  1,001
  99
  115
  133
  153
  173
  195
  218
  242
  268
  295
  323
  352
  382
  414
  447
  481
  517
  554
  592
  632
  673
  717
  762
  808
  857
  908
  961
  1,016
  1,074
  1,134
Total debt, $m
  592
  822
  1,079
  1,357
  1,657
  1,977
  2,318
  2,679
  3,058
  3,458
  3,875
  4,312
  4,768
  5,242
  5,736
  6,250
  6,784
  7,338
  7,915
  8,514
  9,137
  9,785
  10,458
  11,159
  11,889
  12,650
  13,442
  14,269
  15,131
  16,030
  16,970
Total liabilities, $m
  1,315
  1,545
  1,802
  2,080
  2,380
  2,700
  3,041
  3,402
  3,781
  4,181
  4,598
  5,035
  5,491
  5,965
  6,459
  6,973
  7,507
  8,061
  8,638
  9,237
  9,860
  10,508
  11,181
  11,882
  12,612
  13,373
  14,165
  14,992
  15,854
  16,753
  17,693
Total equity, $m
  3,483
  3,013
  3,513
  4,056
  4,640
  5,265
  5,929
  6,632
  7,373
  8,151
  8,966
  9,818
  10,706
  11,632
  12,595
  13,596
  14,637
  15,719
  16,843
  18,011
  19,225
  20,488
  21,802
  23,169
  24,592
  26,075
  27,620
  29,231
  30,912
  32,667
  34,498
Total liabilities and equity, $m
  4,798
  4,558
  5,315
  6,136
  7,020
  7,965
  8,970
  10,034
  11,154
  12,332
  13,564
  14,853
  16,197
  17,597
  19,054
  20,569
  22,144
  23,780
  25,481
  27,248
  29,085
  30,996
  32,983
  35,051
  37,204
  39,448
  41,785
  44,223
  46,766
  49,420
  52,191
Debt-to-equity ratio
  0.170
  0.270
  0.310
  0.330
  0.360
  0.380
  0.390
  0.400
  0.410
  0.420
  0.430
  0.440
  0.450
  0.450
  0.460
  0.460
  0.460
  0.470
  0.470
  0.470
  0.480
  0.480
  0.480
  0.480
  0.480
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
Adjusted equity ratio
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -344
  -1,987
  -2,324
  -2,691
  -3,085
  -3,508
  -3,957
  -4,432
  -4,933
  -5,459
  -6,010
  -6,586
  -7,187
  -7,813
  -8,465
  -9,142
  -9,846
  -10,578
  -11,339
  -12,129
  -12,951
  -13,805
  -14,694
  -15,619
  -16,582
  -17,585
  -18,630
  -19,720
  -20,857
  -22,044
  -23,283
Depreciation, amort., depletion, $m
  75
  165
  192
  222
  254
  288
  324
  363
  403
  446
  491
  537
  586
  636
  689
  744
  801
  860
  922
  985
  1,052
  1,121
  1,193
  1,268
  1,345
  1,427
  1,511
  1,599
  1,691
  1,787
  1,887
Funds from operations, $m
  144
  -1,822
  -2,132
  -2,469
  -2,832
  -3,220
  -3,632
  -4,069
  -4,529
  -5,013
  -5,520
  -6,049
  -6,601
  -7,177
  -7,776
  -8,398
  -9,046
  -9,718
  -10,417
  -11,144
  -11,899
  -12,684
  -13,501
  -14,351
  -15,236
  -16,158
  -17,119
  -18,121
  -19,166
  -20,256
  -21,395
Change in working capital, $m
  30
  15
  16
  18
  19
  21
  22
  23
  24
  26
  27
  28
  29
  30
  32
  33
  34
  36
  37
  38
  40
  42
  43
  45
  47
  49
  51
  53
  55
  58
  60
Cash from operations, $m
  114
  -1,837
  -2,148
  -2,487
  -2,851
  -3,240
  -3,654
  -4,092
  -4,554
  -5,039
  -5,546
  -6,077
  -6,631
  -7,207
  -7,807
  -8,431
  -9,080
  -9,754
  -10,454
  -11,182
  -11,939
  -12,726
  -13,544
  -14,396
  -15,283
  -16,207
  -17,170
  -18,173
  -19,221
  -20,314
  -21,455
Maintenance CAPEX, $m
  0
  -140
  -165
  -192
  -222
  -254
  -288
  -324
  -363
  -403
  -446
  -491
  -537
  -586
  -636
  -689
  -744
  -801
  -860
  -922
  -985
  -1,052
  -1,121
  -1,193
  -1,268
  -1,345
  -1,427
  -1,511
  -1,599
  -1,691
  -1,787
New CAPEX, $m
  -298
  -751
  -821
  -891
  -959
  -1,025
  -1,090
  -1,154
  -1,216
  -1,277
  -1,338
  -1,398
  -1,458
  -1,519
  -1,581
  -1,644
  -1,709
  -1,776
  -1,845
  -1,918
  -1,993
  -2,073
  -2,156
  -2,244
  -2,336
  -2,434
  -2,536
  -2,645
  -2,759
  -2,879
  -3,007
Cash from investing activities, $m
  481
  -891
  -986
  -1,083
  -1,181
  -1,279
  -1,378
  -1,478
  -1,579
  -1,680
  -1,784
  -1,889
  -1,995
  -2,105
  -2,217
  -2,333
  -2,453
  -2,577
  -2,705
  -2,840
  -2,978
  -3,125
  -3,277
  -3,437
  -3,604
  -3,779
  -3,963
  -4,156
  -4,358
  -4,570
  -4,794
Free cash flow, $m
  595
  -2,727
  -3,135
  -3,570
  -4,032
  -4,519
  -5,032
  -5,570
  -6,133
  -6,719
  -7,330
  -7,965
  -8,626
  -9,312
  -10,024
  -10,764
  -11,532
  -12,330
  -13,159
  -14,021
  -14,918
  -15,850
  -16,821
  -17,833
  -18,887
  -19,986
  -21,132
  -22,329
  -23,579
  -24,885
  -26,249
Issuance/(repayment) of debt, $m
  0
  230
  257
  278
  300
  320
  341
  361
  380
  399
  418
  437
  456
  475
  494
  514
  534
  555
  577
  599
  623
  648
  674
  701
  730
  760
  792
  826
  862
  900
  939
Issuance/(repurchase) of shares, $m
  0
  2,433
  2,825
  3,233
  3,670
  4,132
  4,621
  5,135
  5,674
  6,237
  6,825
  7,438
  8,075
  8,739
  9,428
  10,144
  10,887
  11,660
  12,463
  13,297
  14,165
  15,068
  16,007
  16,986
  18,005
  19,067
  20,175
  21,331
  22,538
  23,798
  25,114
Cash from financing (excl. dividends), $m  
  0
  2,663
  3,082
  3,511
  3,970
  4,452
  4,962
  5,496
  6,054
  6,636
  7,243
  7,875
  8,531
  9,214
  9,922
  10,658
  11,421
  12,215
  13,040
  13,896
  14,788
  15,716
  16,681
  17,687
  18,735
  19,827
  20,967
  22,157
  23,400
  24,698
  26,053
Total cash flow (excl. dividends), $m
  595
  -64
  -53
  -58
  -62
  -67
  -71
  -75
  -79
  -83
  -87
  -91
  -95
  -99
  -103
  -107
  -111
  -115
  -120
  -125
  -130
  -135
  -140
  -146
  -152
  -158
  -165
  -172
  -179
  -187
  -195
Retained Cash Flow (-), $m
  269
  -2,433
  -2,825
  -3,233
  -3,670
  -4,132
  -4,621
  -5,135
  -5,674
  -6,237
  -6,825
  -7,438
  -8,075
  -8,739
  -9,428
  -10,144
  -10,887
  -11,660
  -12,463
  -13,297
  -14,165
  -15,068
  -16,007
  -16,986
  -18,005
  -19,067
  -20,175
  -21,331
  -22,538
  -23,798
  -25,114
Prev. year cash balance distribution, $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
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
 
  -1,580
  -2,825
  -3,233
  -3,670
  -4,132
  -4,621
  -5,135
  -5,674
  -6,237
  -6,825
  -7,438
  -8,075
  -8,739
  -9,428
  -10,144
  -10,887
  -11,660
  -12,463
  -13,297
  -14,165
  -15,068
  -16,007
  -16,986
  -18,005
  -19,067
  -20,175
  -21,331
  -22,538
  -23,798
  -25,114
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
 
  -1,515
  -2,586
  -2,814
  -3,022
  -3,203
  -3,354
  -3,469
  -3,546
  -3,583
  -3,578
  -3,532
  -3,446
  -3,323
  -3,165
  -2,978
  -2,767
  -2,537
  -2,295
  -2,047
  -1,800
  -1,559
  -1,328
  -1,113
  -917
  -742
  -589
  -458
  -349
  -260
  -189
Current shareholders' claim on cash, %
  100
  42.5
  18.2
  7.8
  3.4
  1.5
  0.7
  0.3
  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
  0.0
  0.0
  0.0
  0.0

Eldorado Gold Corporation, together with its subsidiaries, engages in the exploration, development, and mining of gold properties in Turkey, China, Greece, Brazil, and Romania. It also explores for iron, silver, lead, and zinc. The company was formerly known as Eldorado Corporation Ltd. and changed its name to Eldorado Gold Corporation in April 1996. Eldorado Gold Corporation was founded in 1992 and is headquartered in Vancouver, Canada.

FINANCIAL RATIOS  of  Eldorado Gold (EGO)

Valuation Ratios
P/E Ratio -3.9
Price to Sales 3.1
Price to Book 0.4
Price to Tangible Book
Price to Cash Flow 11.8
Price to Free Cash Flow -7.3
Growth Rates
Sales Growth Rate -9.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -14.1%
Cap. Spend. - 3 Yr. Gr. Rate -9.2%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 17%
Total Debt to Equity 17%
Interest Coverage 2
Management Effectiveness
Return On Assets -6.8%
Ret/ On Assets - 3 Yr. Avg. -9.6%
Return On Total Capital -8.2%
Ret/ On T. Cap. - 3 Yr. Avg. -12.2%
Return On Equity -9.5%
Return On Equity - 3 Yr. Avg. -13.9%
Asset Turnover 0.1
Profitability Ratios
Gross Margin 37.6%
Gross Margin - 3 Yr. Avg. 32.8%
EBITDA Margin 36.5%
EBITDA Margin - 3 Yr. Avg. -93.9%
Operating Margin 15.5%
Oper. Margin - 3 Yr. Avg. -114.4%
Pre-Tax Margin 11.3%
Pre-Tax Margin - 3 Yr. Avg. -117.4%
Net Profit Margin -79.4%
Net Profit Margin - 3 Yr. Avg. -130.5%
Effective Tax Rate 116.3%
Eff/ Tax Rate - 3 Yr. Avg. 60.5%
Payout Ratio 0%

EGO stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the EGO stock intrinsic value calculation we used $433 million for the last fiscal year's total revenue generated by Eldorado Gold. The default revenue input number comes from 2016 income statement of Eldorado 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 EGO stock valuation model: a) initial revenue growth rate of 17.9% 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 EGO is calculated based on our internal credit rating of Eldorado 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 Eldorado 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 EGO stock the variable cost ratio is equal to 482.4%.

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 EGO 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 5.8% for Eldorado Gold.

Corporate tax rate of 27% is the nominal tax rate for Eldorado 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 EGO 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 EGO are equal to 968.7%.

Life of production assets of 56.3 years is the average useful life of capital assets used in Eldorado 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 EGO is equal to 19.4%. 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 - $3483 million for Eldorado 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 691.558 million for Eldorado 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 Eldorado Gold at the current share price and the inputted number of shares is $1.3 billion.

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COMPANY NEWS

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▶ Eldorado Reports 2017 Second Quarter Results   [Jul-27-17 06:17PM  CNW Group]
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▶ Eldorado Gold Unmoved by Greek Drama   [07:00AM  Morningstar]
▶ What Mining Company Correlation Trends Tell Us   [Jun-09-17 07:37AM  Market Realist]
▶ Eldorado Gold Provides Statement   [Jun-08-17 05:42PM  CNW Group]
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Stock chart of EGO Financial statements of EGO
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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