Intrinsic value of Harmony Gold Mining ADR - HMY

Previous Close

$1.72

  Intrinsic Value

$1.17

stock screener

  Rating & Target

sell

-32%

  Value-price divergence*

+1184%

Previous close

$1.72

 
Intrinsic value

$1.17

 
Up/down potential

-32%

 
Rating

sell

 
Value-price divergence*

+1184%

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

We calculate the intrinsic value of HMY 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 0.8

 

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, %
  18.81
  18.80
  17.42
  16.18
  15.06
  14.05
  13.15
  12.33
  11.60
  10.94
  10.35
  9.81
  9.33
  8.90
  8.51
  8.16
  7.84
  7.56
  7.30
  7.07
  6.86
  6.68
  6.51
  6.36
  6.22
  6.10
  5.99
  5.89
  5.80
  5.72
  5.65
Revenue, $m
  1,383
  1,643
  1,929
  2,241
  2,579
  2,941
  3,328
  3,739
  4,172
  4,629
  5,108
  5,609
  6,132
  6,678
  7,246
  7,837
  8,451
  9,090
  9,754
  10,443
  11,160
  11,906
  12,681
  13,487
  14,326
  15,200
  16,111
  17,060
  18,050
  19,083
  20,161
Variable operating expenses, $m
 
  2,197
  2,579
  2,995
  3,445
  3,928
  4,444
  4,991
  5,570
  6,178
  6,817
  7,479
  8,176
  8,904
  9,661
  10,449
  11,269
  12,120
  13,005
  13,925
  14,881
  15,875
  16,908
  17,983
  19,102
  20,268
  21,482
  22,747
  24,067
  25,444
  26,882
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
  1,263
  2,197
  2,579
  2,995
  3,445
  3,928
  4,444
  4,991
  5,570
  6,178
  6,817
  7,479
  8,176
  8,904
  9,661
  10,449
  11,269
  12,120
  13,005
  13,925
  14,881
  15,875
  16,908
  17,983
  19,102
  20,268
  21,482
  22,747
  24,067
  25,444
  26,882
Operating income, $m
  121
  -554
  -650
  -754
  -866
  -987
  -1,116
  -1,253
  -1,397
  -1,549
  -1,709
  -1,870
  -2,044
  -2,226
  -2,416
  -2,613
  -2,817
  -3,030
  -3,252
  -3,482
  -3,721
  -3,969
  -4,227
  -4,496
  -4,776
  -5,067
  -5,371
  -5,687
  -6,017
  -6,362
  -6,721
EBITDA, $m
  121
  -281
  -330
  -383
  -441
  -503
  -569
  -639
  -713
  -791
  -873
  -959
  -1,048
  -1,142
  -1,239
  -1,340
  -1,445
  -1,554
  -1,668
  -1,786
  -1,908
  -2,036
  -2,168
  -2,306
  -2,449
  -2,599
  -2,755
  -2,917
  -3,086
  -3,263
  -3,447
Interest expense (income), $m
  12
  9
  15
  23
  31
  40
  49
  59
  70
  82
  93
  106
  119
  133
  147
  162
  177
  193
  210
  227
  245
  264
  284
  304
  325
  347
  370
  394
  418
  444
  471
Earnings before tax, $m
  119
  -563
  -665
  -776
  -897
  -1,027
  -1,165
  -1,312
  -1,467
  -1,631
  -1,803
  -1,976
  -2,163
  -2,359
  -2,563
  -2,774
  -2,995
  -3,224
  -3,462
  -3,709
  -3,966
  -4,233
  -4,511
  -4,800
  -5,101
  -5,414
  -5,741
  -6,081
  -6,436
  -6,806
  -7,192
Tax expense, $m
  47
  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
  72
  -563
  -665
  -776
  -897
  -1,027
  -1,165
  -1,312
  -1,467
  -1,631
  -1,803
  -1,976
  -2,163
  -2,359
  -2,563
  -2,774
  -2,995
  -3,224
  -3,462
  -3,709
  -3,966
  -4,233
  -4,511
  -4,800
  -5,101
  -5,414
  -5,741
  -6,081
  -6,436
  -6,806
  -7,192

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  95
  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
  2,794
  3,209
  3,768
  4,378
  5,037
  5,745
  6,500
  7,302
  8,149
  9,040
  9,976
  10,955
  11,977
  13,042
  14,152
  15,306
  16,506
  17,754
  19,050
  20,397
  21,797
  23,253
  24,767
  26,342
  27,981
  29,688
  31,467
  33,320
  35,254
  37,271
  39,377
Adjusted assets (=assets-cash), $m
  2,699
  3,209
  3,768
  4,378
  5,037
  5,745
  6,500
  7,302
  8,149
  9,040
  9,976
  10,955
  11,977
  13,042
  14,152
  15,306
  16,506
  17,754
  19,050
  20,397
  21,797
  23,253
  24,767
  26,342
  27,981
  29,688
  31,467
  33,320
  35,254
  37,271
  39,377
Revenue / Adjusted assets
  0.512
  0.512
  0.512
  0.512
  0.512
  0.512
  0.512
  0.512
  0.512
  0.512
  0.512
  0.512
  0.512
  0.512
  0.512
  0.512
  0.512
  0.512
  0.512
  0.512
  0.512
  0.512
  0.512
  0.512
  0.512
  0.512
  0.512
  0.512
  0.512
  0.512
  0.512
Average production assets, $m
  2,246
  2,668
  3,133
  3,640
  4,188
  4,777
  5,405
  6,071
  6,776
  7,517
  8,295
  9,109
  9,958
  10,845
  11,767
  12,727
  13,725
  14,762
  15,840
  16,960
  18,124
  19,335
  20,593
  21,903
  23,266
  24,685
  26,164
  27,706
  29,313
  30,990
  32,741
Working capital, $m
  109
  44
  52
  61
  70
  79
  90
  101
  113
  125
  138
  151
  166
  180
  196
  212
  228
  245
  263
  282
  301
  321
  342
  364
  387
  410
  435
  461
  487
  515
  544
Total debt, $m
  176
  275
  409
  554
  712
  881
  1,062
  1,253
  1,456
  1,669
  1,892
  2,126
  2,370
  2,625
  2,890
  3,166
  3,453
  3,751
  4,061
  4,383
  4,718
  5,065
  5,427
  5,804
  6,195
  6,603
  7,028
  7,472
  7,934
  8,416
  8,919
Total liabilities, $m
  668
  767
  901
  1,046
  1,204
  1,373
  1,554
  1,745
  1,948
  2,161
  2,384
  2,618
  2,862
  3,117
  3,382
  3,658
  3,945
  4,243
  4,553
  4,875
  5,210
  5,557
  5,919
  6,296
  6,687
  7,095
  7,520
  7,964
  8,426
  8,908
  9,411
Total equity, $m
  2,126
  2,442
  2,867
  3,331
  3,833
  4,372
  4,947
  5,557
  6,201
  6,880
  7,592
  8,336
  9,114
  9,925
  10,770
  11,648
  12,561
  13,511
  14,497
  15,522
  16,588
  17,696
  18,848
  20,046
  21,293
  22,593
  23,946
  25,357
  26,828
  28,363
  29,966
Total liabilities and equity, $m
  2,794
  3,209
  3,768
  4,377
  5,037
  5,745
  6,501
  7,302
  8,149
  9,041
  9,976
  10,954
  11,976
  13,042
  14,152
  15,306
  16,506
  17,754
  19,050
  20,397
  21,798
  23,253
  24,767
  26,342
  27,980
  29,688
  31,466
  33,321
  35,254
  37,271
  39,377
Debt-to-equity ratio
  0.083
  0.110
  0.140
  0.170
  0.190
  0.200
  0.210
  0.230
  0.230
  0.240
  0.250
  0.260
  0.260
  0.260
  0.270
  0.270
  0.270
  0.280
  0.280
  0.280
  0.280
  0.290
  0.290
  0.290
  0.290
  0.290
  0.290
  0.290
  0.300
  0.300
  0.300
Adjusted equity ratio
  0.753
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761
  0.761

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  72
  -563
  -665
  -776
  -897
  -1,027
  -1,165
  -1,312
  -1,467
  -1,631
  -1,803
  -1,976
  -2,163
  -2,359
  -2,563
  -2,774
  -2,995
  -3,224
  -3,462
  -3,709
  -3,966
  -4,233
  -4,511
  -4,800
  -5,101
  -5,414
  -5,741
  -6,081
  -6,436
  -6,806
  -7,192
Depreciation, amort., depletion, $m
  0
  273
  320
  370
  425
  484
  547
  614
  684
  758
  836
  911
  996
  1,084
  1,177
  1,273
  1,372
  1,476
  1,584
  1,696
  1,812
  1,933
  2,059
  2,190
  2,327
  2,469
  2,616
  2,771
  2,931
  3,099
  3,274
Funds from operations, $m
  680
  -289
  -345
  -406
  -472
  -543
  -618
  -699
  -784
  -873
  -967
  -1,065
  -1,167
  -1,274
  -1,386
  -1,502
  -1,622
  -1,748
  -1,878
  -2,013
  -2,154
  -2,300
  -2,452
  -2,610
  -2,774
  -2,946
  -3,124
  -3,310
  -3,504
  -3,707
  -3,918
Change in working capital, $m
  340
  7
  8
  8
  9
  10
  10
  11
  12
  12
  13
  14
  14
  15
  15
  16
  17
  17
  18
  19
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
Cash from operations, $m
  340
  -296
  -353
  -415
  -481
  -553
  -629
  -710
  -795
  -885
  -980
  -1,078
  -1,182
  -1,289
  -1,401
  -1,518
  -1,639
  -1,765
  -1,896
  -2,032
  -2,173
  -2,320
  -2,473
  -2,632
  -2,797
  -2,969
  -3,149
  -3,336
  -3,531
  -3,735
  -3,947
Maintenance CAPEX, $m
  0
  -225
  -267
  -313
  -364
  -419
  -478
  -540
  -607
  -678
  -752
  -829
  -911
  -996
  -1,084
  -1,177
  -1,273
  -1,372
  -1,476
  -1,584
  -1,696
  -1,812
  -1,933
  -2,059
  -2,190
  -2,327
  -2,469
  -2,616
  -2,771
  -2,931
  -3,099
New CAPEX, $m
  -184
  -423
  -465
  -507
  -548
  -589
  -628
  -667
  -704
  -741
  -778
  -814
  -850
  -886
  -923
  -960
  -998
  -1,037
  -1,078
  -1,120
  -1,164
  -1,210
  -1,259
  -1,310
  -1,363
  -1,419
  -1,479
  -1,541
  -1,608
  -1,677
  -1,751
Cash from investing activities, $m
  -196
  -648
  -732
  -820
  -912
  -1,008
  -1,106
  -1,207
  -1,311
  -1,419
  -1,530
  -1,643
  -1,761
  -1,882
  -2,007
  -2,137
  -2,271
  -2,409
  -2,554
  -2,704
  -2,860
  -3,022
  -3,192
  -3,369
  -3,553
  -3,746
  -3,948
  -4,157
  -4,379
  -4,608
  -4,850
Free cash flow, $m
  144
  -944
  -1,085
  -1,235
  -1,393
  -1,560
  -1,735
  -1,917
  -2,107
  -2,304
  -2,509
  -2,722
  -2,942
  -3,171
  -3,408
  -3,654
  -3,910
  -4,174
  -4,450
  -4,736
  -5,033
  -5,343
  -5,665
  -6,000
  -6,350
  -6,715
  -7,096
  -7,494
  -7,909
  -8,343
  -8,797
Issuance/(repayment) of debt, $m
  -132
  122
  134
  146
  158
  169
  181
  192
  202
  213
  224
  234
  244
  255
  265
  276
  287
  298
  310
  322
  335
  348
  362
  376
  392
  408
  425
  443
  462
  482
  503
Issuance/(repurchase) of shares, $m
  0
  951
  1,090
  1,240
  1,399
  1,566
  1,740
  1,922
  2,112
  2,309
  2,514
  2,721
  2,941
  3,170
  3,407
  3,653
  3,908
  4,173
  4,448
  4,734
  5,031
  5,341
  5,663
  5,999
  6,348
  6,713
  7,094
  7,492
  7,907
  8,341
  8,795
Cash from financing (excl. dividends), $m  
  -132
  1,073
  1,224
  1,386
  1,557
  1,735
  1,921
  2,114
  2,314
  2,522
  2,738
  2,955
  3,185
  3,425
  3,672
  3,929
  4,195
  4,471
  4,758
  5,056
  5,366
  5,689
  6,025
  6,375
  6,740
  7,121
  7,519
  7,935
  8,369
  8,823
  9,298
Total cash flow (excl. dividends), $m
  14
  129
  139
  151
  163
  175
  186
  197
  208
  218
  229
  233
  243
  253
  264
  275
  285
  297
  308
  320
  333
  346
  360
  375
  390
  406
  423
  441
  460
  480
  501
Retained Cash Flow (-), $m
  -108
  -951
  -1,090
  -1,240
  -1,399
  -1,566
  -1,740
  -1,922
  -2,112
  -2,309
  -2,514
  -2,721
  -2,941
  -3,170
  -3,407
  -3,653
  -3,908
  -4,173
  -4,448
  -4,734
  -5,031
  -5,341
  -5,663
  -5,999
  -6,348
  -6,713
  -7,094
  -7,492
  -7,907
  -8,341
  -8,795
Prev. year cash balance distribution, $m
 
  72
  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
 
  -750
  -951
  -1,089
  -1,236
  -1,391
  -1,554
  -1,725
  -1,904
  -2,091
  -2,286
  -2,488
  -2,698
  -2,916
  -3,143
  -3,378
  -3,623
  -3,876
  -4,140
  -4,414
  -4,698
  -4,995
  -5,303
  -5,624
  -5,959
  -6,307
  -6,671
  -7,051
  -7,447
  -7,861
  -8,294
Discount rate, %
 
  6.10
  6.41
  6.73
  7.06
  7.41
  7.79
  8.17
  8.58
  9.01
  9.46
  9.94
  10.43
  10.95
  11.50
  12.08
  12.68
  13.32
  13.98
  14.68
  15.41
  16.19
  16.99
  17.84
  18.74
  19.67
  20.66
  21.69
  22.77
  23.91
  25.11
PV of cash for distribution, $m
 
  -707
  -840
  -896
  -941
  -973
  -991
  -995
  -985
  -962
  -925
  -878
  -820
  -755
  -684
  -611
  -536
  -463
  -393
  -327
  -267
  -214
  -168
  -129
  -97
  -71
  -51
  -35
  -24
  -16
  -10
Current shareholders' claim on cash, %
  100
  60.2
  36.8
  22.7
  14.2
  9.0
  5.7
  3.7
  2.4
  1.6
  1.0
  0.7
  0.4
  0.3
  0.2
  0.1
  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

Harmony Gold Mining Company Limited engages in the exploration and mining of gold in South Africa and Papua New Guinea. The company also explores for copper, silver, uranium, and molybdenum deposits. It has nine underground operations located on the Witwatersrand Basin; an open-pit mine in the Kraaipan Greenstone Belt; and various other surface operations in South Africa. The company owns interests in the Hidden Valley, an open-pit gold and silver mine; the Wafi Golpu project in Morobe province; and the Kili Teke gold-copper exploration project in Papua New Guinea. Harmony Gold Mining Company Limited was incorporated in 1950 and is based in Randfontein, South Africa.

FINANCIAL RATIOS  of  Harmony Gold Mining ADR (HMY)

Valuation Ratios
P/E Ratio 10.4
Price to Sales 0.5
Price to Book 0.4
Price to Tangible Book
Price to Cash Flow 2.2
Price to Free Cash Flow 4.8
Growth Rates
Sales Growth Rate 18.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -14%
Cap. Spend. - 3 Yr. Gr. Rate -14.9%
Financial Strength
Quick Ratio 4
Current Ratio 0.2
LT Debt to Equity 7.2%
Total Debt to Equity 8.3%
Interest Coverage 11
Management Effectiveness
Return On Assets 2.9%
Ret/ On Assets - 3 Yr. Avg. -3.4%
Return On Total Capital 3.1%
Ret/ On T. Cap. - 3 Yr. Avg. -4.4%
Return On Equity 3.5%
Return On Equity - 3 Yr. Avg. -4.8%
Asset Turnover 0.5
Profitability Ratios
Gross Margin 13.7%
Gross Margin - 3 Yr. Avg. 7.6%
EBITDA Margin 9.5%
EBITDA Margin - 3 Yr. Avg. -5.5%
Operating Margin 8.7%
Oper. Margin - 3 Yr. Avg. -11.6%
Pre-Tax Margin 8.6%
Pre-Tax Margin - 3 Yr. Avg. -11.6%
Net Profit Margin 5.2%
Net Profit Margin - 3 Yr. Avg. -10.7%
Effective Tax Rate 39.5%
Eff/ Tax Rate - 3 Yr. Avg. 23.9%
Payout Ratio 0%

HMY stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the HMY stock intrinsic value calculation we used $1383 million for the last fiscal year's total revenue generated by Harmony Gold Mining ADR. The default revenue input number comes from 2016 income statement of Harmony Gold Mining ADR. 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 HMY stock valuation model: a) initial revenue growth rate of 18.8% 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 6.1%, whose default value for HMY is calculated based on our internal credit rating of Harmony Gold Mining ADR, 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 Harmony Gold Mining ADR.
    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 HMY stock the variable cost ratio is equal to 133.8%.

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 HMY 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 5.6% for Harmony Gold Mining ADR.

Corporate tax rate of 27% is the nominal tax rate for Harmony Gold Mining ADR. 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 HMY 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 HMY are equal to 162.4%.

Life of production assets of 10 years is the average useful life of capital assets used in Harmony Gold Mining ADR 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 HMY is equal to 2.7%. 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 - $2126 million for Harmony Gold Mining ADR - 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 441.406 million for Harmony Gold Mining ADR 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 Harmony Gold Mining ADR at the current share price and the inputted number of shares is $0.8 billion.

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Stock chart of HMY Financial statements of HMY
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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