Intrinsic value of Southern Copper - SCCO

Previous Close

$43.32

  Intrinsic Value

$12.80

stock screener

  Rating & Target

str. sell

-70%

Previous close

$43.32

 
Intrinsic value

$12.80

 
Up/down potential

-70%

 
Rating

str. sell

We calculate the intrinsic value of SCCO 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 33.5

 

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, %
  6.62
  14.60
  13.64
  12.78
  12.00
  11.30
  10.67
  10.10
  9.59
  9.13
  8.72
  8.35
  8.01
  7.71
  7.44
  7.20
  6.98
  6.78
  6.60
  6.44
  6.30
  6.17
  6.05
  5.95
  5.85
  5.77
  5.69
  5.62
  5.56
  5.50
  5.45
Revenue, $m
  5,380
  6,165
  7,006
  7,902
  8,850
  9,850
  10,900
  12,002
  13,153
  14,354
  15,605
  16,908
  18,263
  19,671
  21,135
  22,655
  24,236
  25,879
  27,587
  29,364
  31,213
  33,138
  35,143
  37,232
  39,411
  41,683
  44,055
  46,531
  49,117
  51,820
  54,645
Variable operating expenses, $m
 
  3,397
  3,861
  4,354
  4,876
  5,427
  6,006
  6,613
  7,247
  7,909
  8,599
  9,316
  10,063
  10,839
  11,645
  12,483
  13,354
  14,259
  15,201
  16,180
  17,198
  18,259
  19,364
  20,515
  21,715
  22,967
  24,274
  25,638
  27,063
  28,553
  30,109
Fixed operating expenses, $m
 
  895
  917
  940
  964
  988
  1,012
  1,038
  1,064
  1,090
  1,118
  1,145
  1,174
  1,203
  1,234
  1,264
  1,296
  1,328
  1,362
  1,396
  1,431
  1,466
  1,503
  1,541
  1,579
  1,618
  1,659
  1,700
  1,743
  1,787
  1,831
Total operating expenses, $m
  3,816
  4,292
  4,778
  5,294
  5,840
  6,415
  7,018
  7,651
  8,311
  8,999
  9,717
  10,461
  11,237
  12,042
  12,879
  13,747
  14,650
  15,587
  16,563
  17,576
  18,629
  19,725
  20,867
  22,056
  23,294
  24,585
  25,933
  27,338
  28,806
  30,340
  31,940
Operating income, $m
  1,564
  1,873
  2,229
  2,608
  3,010
  3,435
  3,882
  4,351
  4,842
  5,355
  5,889
  6,446
  7,026
  7,629
  8,256
  8,908
  9,586
  10,291
  11,025
  11,789
  12,584
  13,413
  14,276
  15,177
  16,116
  17,097
  18,122
  19,192
  20,311
  21,480
  22,704
EBITDA, $m
  2,211
  2,613
  3,069
  3,555
  4,071
  4,616
  5,189
  5,790
  6,419
  7,076
  7,761
  8,474
  9,216
  9,988
  10,790
  11,625
  12,493
  13,395
  14,334
  15,310
  16,327
  17,387
  18,491
  19,642
  20,843
  22,096
  23,405
  24,772
  26,201
  27,695
  29,258
Interest expense (income), $m
  357
  357
  422
  491
  565
  644
  726
  813
  904
  999
  1,098
  1,201
  1,309
  1,420
  1,537
  1,657
  1,783
  1,913
  2,049
  2,190
  2,337
  2,489
  2,648
  2,814
  2,986
  3,166
  3,353
  3,549
  3,754
  3,967
  4,190
Earnings before tax, $m
  1,256
  1,516
  1,807
  2,116
  2,445
  2,791
  3,156
  3,538
  3,938
  4,356
  4,791
  5,245
  5,717
  6,208
  6,719
  7,250
  7,803
  8,378
  8,976
  9,599
  10,247
  10,923
  11,628
  12,363
  13,130
  13,931
  14,768
  15,643
  16,557
  17,513
  18,514
Tax expense, $m
  501
  409
  488
  571
  660
  754
  852
  955
  1,063
  1,176
  1,294
  1,416
  1,544
  1,676
  1,814
  1,958
  2,107
  2,262
  2,424
  2,592
  2,767
  2,949
  3,140
  3,338
  3,545
  3,761
  3,987
  4,224
  4,470
  4,729
  4,999
Net income, $m
  777
  1,107
  1,319
  1,545
  1,785
  2,038
  2,304
  2,583
  2,875
  3,180
  3,498
  3,829
  4,174
  4,532
  4,905
  5,293
  5,696
  6,116
  6,553
  7,007
  7,481
  7,974
  8,489
  9,025
  9,585
  10,170
  10,781
  11,419
  12,087
  12,785
  13,515

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  597
  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
  13,234
  14,473
  16,447
  18,548
  20,774
  23,121
  25,588
  28,173
  30,875
  33,694
  36,632
  39,690
  42,870
  46,176
  49,612
  53,182
  56,892
  60,749
  64,759
  68,930
  73,270
  77,789
  82,496
  87,400
  92,514
  97,848
  103,415
  109,227
  115,298
  121,642
  128,274
Adjusted assets (=assets-cash), $m
  12,637
  14,473
  16,447
  18,548
  20,774
  23,121
  25,588
  28,173
  30,875
  33,694
  36,632
  39,690
  42,870
  46,176
  49,612
  53,182
  56,892
  60,749
  64,759
  68,930
  73,270
  77,789
  82,496
  87,400
  92,514
  97,848
  103,415
  109,227
  115,298
  121,642
  128,274
Revenue / Adjusted assets
  0.426
  0.426
  0.426
  0.426
  0.426
  0.426
  0.426
  0.426
  0.426
  0.426
  0.426
  0.426
  0.426
  0.426
  0.426
  0.426
  0.426
  0.426
  0.426
  0.426
  0.426
  0.426
  0.426
  0.426
  0.426
  0.426
  0.426
  0.426
  0.426
  0.426
  0.426
Average production assets, $m
  8,648
  9,908
  11,259
  12,698
  14,221
  15,828
  17,517
  19,286
  21,136
  23,067
  25,078
  27,171
  29,348
  31,611
  33,963
  36,407
  38,947
  41,588
  44,333
  47,188
  50,160
  53,253
  56,475
  59,833
  63,333
  66,985
  70,796
  74,775
  78,931
  83,274
  87,814
Working capital, $m
  1,567
  1,110
  1,261
  1,422
  1,593
  1,773
  1,962
  2,160
  2,367
  2,584
  2,809
  3,043
  3,287
  3,541
  3,804
  4,078
  4,362
  4,658
  4,966
  5,286
  5,618
  5,965
  6,326
  6,702
  7,094
  7,503
  7,930
  8,376
  8,841
  9,328
  9,836
Total debt, $m
  5,954
  7,033
  8,190
  9,421
  10,725
  12,101
  13,546
  15,061
  16,645
  18,297
  20,019
  21,810
  23,674
  25,611
  27,624
  29,717
  31,891
  34,151
  36,501
  38,945
  41,488
  44,136
  46,894
  49,769
  52,765
  55,891
  59,153
  62,559
  66,117
  69,834
  73,721
Total liabilities, $m
  7,402
  8,481
  9,638
  10,869
  12,173
  13,549
  14,994
  16,509
  18,093
  19,745
  21,467
  23,258
  25,122
  27,059
  29,072
  31,165
  33,339
  35,599
  37,949
  40,393
  42,936
  45,584
  48,342
  51,217
  54,213
  57,339
  60,601
  64,007
  67,565
  71,282
  75,169
Total equity, $m
  5,832
  5,992
  6,809
  7,679
  8,600
  9,572
  10,593
  11,663
  12,782
  13,949
  15,166
  16,432
  17,748
  19,117
  20,539
  22,017
  23,553
  25,150
  26,810
  28,537
  30,334
  32,205
  34,153
  36,184
  38,301
  40,509
  42,814
  45,220
  47,733
  50,360
  53,106
Total liabilities and equity, $m
  13,234
  14,473
  16,447
  18,548
  20,773
  23,121
  25,587
  28,172
  30,875
  33,694
  36,633
  39,690
  42,870
  46,176
  49,611
  53,182
  56,892
  60,749
  64,759
  68,930
  73,270
  77,789
  82,495
  87,401
  92,514
  97,848
  103,415
  109,227
  115,298
  121,642
  128,275
Debt-to-equity ratio
  1.021
  1.170
  1.200
  1.230
  1.250
  1.260
  1.280
  1.290
  1.300
  1.310
  1.320
  1.330
  1.330
  1.340
  1.340
  1.350
  1.350
  1.360
  1.360
  1.360
  1.370
  1.370
  1.370
  1.380
  1.380
  1.380
  1.380
  1.380
  1.390
  1.390
  1.390
Adjusted equity ratio
  0.414
  0.414
  0.414
  0.414
  0.414
  0.414
  0.414
  0.414
  0.414
  0.414
  0.414
  0.414
  0.414
  0.414
  0.414
  0.414
  0.414
  0.414
  0.414
  0.414
  0.414
  0.414
  0.414
  0.414
  0.414
  0.414
  0.414
  0.414
  0.414
  0.414
  0.414

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  777
  1,107
  1,319
  1,545
  1,785
  2,038
  2,304
  2,583
  2,875
  3,180
  3,498
  3,829
  4,174
  4,532
  4,905
  5,293
  5,696
  6,116
  6,553
  7,007
  7,481
  7,974
  8,489
  9,025
  9,585
  10,170
  10,781
  11,419
  12,087
  12,785
  13,515
Depreciation, amort., depletion, $m
  647
  739
  840
  948
  1,061
  1,181
  1,307
  1,439
  1,577
  1,721
  1,871
  2,028
  2,190
  2,359
  2,535
  2,717
  2,907
  3,104
  3,308
  3,522
  3,743
  3,974
  4,215
  4,465
  4,726
  4,999
  5,283
  5,580
  5,890
  6,214
  6,553
Funds from operations, $m
  529
  1,846
  2,159
  2,492
  2,846
  3,219
  3,611
  4,022
  4,452
  4,901
  5,369
  5,857
  6,364
  6,891
  7,440
  8,010
  8,603
  9,219
  9,861
  10,529
  11,224
  11,948
  12,703
  13,490
  14,312
  15,169
  16,064
  16,999
  17,977
  18,999
  20,069
Change in working capital, $m
  -394
  141
  151
  161
  171
  180
  189
  198
  207
  216
  225
  234
  244
  253
  263
  274
  285
  296
  307
  320
  333
  346
  361
  376
  392
  409
  427
  446
  466
  486
  509
Cash from operations, $m
  923
  1,705
  2,008
  2,331
  2,675
  3,039
  3,422
  3,824
  4,245
  4,685
  5,144
  5,622
  6,120
  6,638
  7,176
  7,736
  8,318
  8,924
  9,553
  10,209
  10,891
  11,602
  12,342
  13,114
  13,919
  14,760
  15,637
  16,554
  17,511
  18,513
  19,560
Maintenance CAPEX, $m
  0
  -645
  -739
  -840
  -948
  -1,061
  -1,181
  -1,307
  -1,439
  -1,577
  -1,721
  -1,871
  -2,028
  -2,190
  -2,359
  -2,535
  -2,717
  -2,907
  -3,104
  -3,308
  -3,522
  -3,743
  -3,974
  -4,215
  -4,465
  -4,726
  -4,999
  -5,283
  -5,580
  -5,890
  -6,214
New CAPEX, $m
  -1,119
  -1,260
  -1,351
  -1,438
  -1,524
  -1,607
  -1,689
  -1,770
  -1,850
  -1,930
  -2,011
  -2,093
  -2,177
  -2,263
  -2,352
  -2,444
  -2,540
  -2,640
  -2,745
  -2,855
  -2,971
  -3,093
  -3,222
  -3,358
  -3,501
  -3,652
  -3,811
  -3,979
  -4,156
  -4,343
  -4,540
Cash from investing activities, $m
  -452
  -1,905
  -2,090
  -2,278
  -2,472
  -2,668
  -2,870
  -3,077
  -3,289
  -3,507
  -3,732
  -3,964
  -4,205
  -4,453
  -4,711
  -4,979
  -5,257
  -5,547
  -5,849
  -6,163
  -6,493
  -6,836
  -7,196
  -7,573
  -7,966
  -8,378
  -8,810
  -9,262
  -9,736
  -10,233
  -10,754
Free cash flow, $m
  471
  -200
  -83
  53
  204
  371
  552
  747
  956
  1,177
  1,411
  1,657
  1,915
  2,184
  2,465
  2,757
  3,061
  3,377
  3,705
  4,045
  4,398
  4,765
  5,146
  5,542
  5,954
  6,382
  6,827
  7,291
  7,775
  8,279
  8,805
Issuance/(repayment) of debt, $m
  0
  1,079
  1,157
  1,231
  1,304
  1,375
  1,445
  1,515
  1,583
  1,652
  1,722
  1,792
  1,864
  1,937
  2,013
  2,092
  2,174
  2,260
  2,350
  2,444
  2,543
  2,648
  2,758
  2,874
  2,997
  3,126
  3,262
  3,406
  3,558
  3,718
  3,886
Issuance/(repurchase) of shares, $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
  0
Cash from financing (excl. dividends), $m  
  -72
  1,079
  1,157
  1,231
  1,304
  1,375
  1,445
  1,515
  1,583
  1,652
  1,722
  1,792
  1,864
  1,937
  2,013
  2,092
  2,174
  2,260
  2,350
  2,444
  2,543
  2,648
  2,758
  2,874
  2,997
  3,126
  3,262
  3,406
  3,558
  3,718
  3,886
Total cash flow (excl. dividends), $m
  411
  879
  1,074
  1,284
  1,508
  1,746
  1,997
  2,262
  2,539
  2,830
  3,133
  3,449
  3,779
  4,122
  4,478
  4,850
  5,235
  5,637
  6,055
  6,489
  6,942
  7,413
  7,904
  8,416
  8,950
  9,508
  10,089
  10,697
  11,333
  11,997
  12,692
Retained Cash Flow (-), $m
  -569
  -757
  -817
  -870
  -921
  -972
  -1,021
  -1,070
  -1,119
  -1,167
  -1,216
  -1,266
  -1,317
  -1,369
  -1,422
  -1,478
  -1,536
  -1,597
  -1,660
  -1,727
  -1,797
  -1,871
  -1,949
  -2,031
  -2,117
  -2,208
  -2,305
  -2,406
  -2,513
  -2,626
  -2,746
Prev. year cash balance distribution, $m
 
  597
  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
 
  719
  256
  414
  587
  774
  976
  1,192
  1,421
  1,662
  1,917
  2,183
  2,462
  2,753
  3,056
  3,371
  3,699
  4,040
  4,394
  4,762
  5,145
  5,542
  5,956
  6,386
  6,833
  7,299
  7,785
  8,291
  8,819
  9,371
  9,946
Discount rate, %
 
  7.30
  7.67
  8.05
  8.45
  8.87
  9.32
  9.78
  10.27
  10.79
  11.32
  11.89
  12.49
  13.11
  13.77
  14.45
  15.18
  15.93
  16.73
  17.57
  18.45
  19.37
  20.34
  21.35
  22.42
  23.54
  24.72
  25.96
  27.25
  28.62
  30.05
PV of cash for distribution, $m
 
  670
  221
  328
  424
  506
  572
  620
  650
  661
  656
  634
  600
  555
  502
  445
  386
  327
  271
  220
  174
  135
  101
  74
  53
  37
  25
  16
  10
  6
  4
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Southern Copper Corporation is an integrated copper producer. It produces copper and, in the production process, obtains several by-products, including molybdenum, silver, zinc, sulfuric acid and other metals. Its segments include the Peruvian operations, the Mexican open-pit operations and the Mexican underground mining operations segment identified as the IMMSA unit. The Peruvian operations segment includes the Toquepala and Cuajone mine complexes, and the smelting and refining plants, including a metals plant industrial railroad and port facilities that service both mines. The Mexican open-pit operations segment includes the La Caridad and Buenavista mine complexes, and the smelting and refining plants, including a metals plant and a copper rod plant, and support facilities that service both mines. As of December 31, 2016, the Mexican underground mining operations segment included five underground mines that produce zinc, copper, silver and gold, a coal mine and a zinc refinery.

FINANCIAL RATIOS  of  Southern Copper (SCCO)

Valuation Ratios
P/E Ratio 43.1
Price to Sales 6.2
Price to Book 5.7
Price to Tangible Book
Price to Cash Flow 36.3
Price to Free Cash Flow -170.9
Growth Rates
Sales Growth Rate 6.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -2.7%
Cap. Spend. - 3 Yr. Gr. Rate -8.1%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 102.1%
Total Debt to Equity 102.1%
Interest Coverage 5
Management Effectiveness
Return On Assets 7.7%
Ret/ On Assets - 3 Yr. Avg. 9.6%
Return On Total Capital 6.8%
Ret/ On T. Cap. - 3 Yr. Avg. 9.1%
Return On Equity 14%
Return On Equity - 3 Yr. Avg. 16.9%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 43.6%
Gross Margin - 3 Yr. Avg. 45.5%
EBITDA Margin 42%
EBITDA Margin - 3 Yr. Avg. 43.3%
Operating Margin 29.1%
Oper. Margin - 3 Yr. Avg. 31.9%
Pre-Tax Margin 23.3%
Pre-Tax Margin - 3 Yr. Avg. 27.6%
Net Profit Margin 14.4%
Net Profit Margin - 3 Yr. Avg. 17.4%
Effective Tax Rate 39.9%
Eff/ Tax Rate - 3 Yr. Avg. 38.5%
Payout Ratio 17.9%

SCCO stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the SCCO stock intrinsic value calculation we used $5380 million for the last fiscal year's total revenue generated by Southern Copper. The default revenue input number comes from 2016 income statement of Southern Copper. 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 SCCO stock valuation model: a) initial revenue growth rate of 14.6% 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 7.3%, whose default value for SCCO is calculated based on our internal credit rating of Southern Copper, 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 Southern Copper.
    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 SCCO stock the variable cost ratio is equal to 55.1%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $873 million in the base year in the intrinsic value calculation for SCCO 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 6% for Southern Copper.

Corporate tax rate of 27% is the nominal tax rate for Southern Copper. 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 SCCO 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 SCCO are equal to 160.7%.

Life of production assets of 13.4 years is the average useful life of capital assets used in Southern Copper 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 SCCO is equal to 18%. 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 - $5832 million for Southern Copper - 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 773.012 million for Southern Copper 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 Southern Copper at the current share price and the inputted number of shares is $33.5 billion.

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RIO Rio Tinto ADR 49.12 6.29  str.sell

COMPANY NEWS

▶ Can Southern Copper Continue to Surprise Analysts in 2018?   [Dec-12-17 07:30AM  Market Realist]
▶ Top 5 Copper Stocks for 2017   [Dec-10-17 04:25PM  Investopedia]
▶ Which Copper Miner Is Wall Street Betting On in 2018?   [Dec-08-17 07:51AM  Market Realist]
▶ Whats Keeping Copper Prices Strong this Year?   [Nov-29-17 02:25PM  Market Realist]
▶ Glencore or Freeport: Which Has More Upside Potential?   [Nov-23-17 10:31AM  Market Realist]
▶ How Freeports 3Q17 Earnings Stack Up against Peers   [Nov-21-17 01:25PM  Market Realist]
▶ What Factors Impacted Copper Miners Last Week?   [Nov-20-17 04:00PM  Market Realist]
▶ 5 Of The Hottest Mining Stocks For 2018   [Nov-15-17 07:30PM  Oilprice.com]
▶ Top 5 Copper Stocks for 2017   [Nov-09-17 11:20AM  Investopedia]
▶ 5 Strong Buy Stocks Bursting To New Highs   [Nov-07-17 04:26PM  Zacks]
▶ Copper Miners Had Dull Week despite Higher Copper Prices   [Oct-23-17 09:21AM  Market Realist]
▶ Why Turquoise Hill Resources Analyst Ratings Matter   [Oct-11-17 10:37AM  Market Realist]
▶ Reading Southern Coppers Analyst Ratings   [07:39AM  Market Realist]
▶ Why Analysts See a Downside in Southern Copper   [Sep-28-17 07:38AM  Market Realist]
▶ Copper Producers to Benefit From Hurricanes   [Sep-13-17 01:10PM  GuruFocus.com]
▶ Why Chinas Copper Demand Could Impact Miners   [10:37AM  Market Realist]
▶ Analysts Rate Southern Copper amid Rising Copper Prices   [Aug-29-17 12:35PM  Market Realist]
▶ Southern Copper Is Headed North   [Aug-22-17 02:40PM  TheStreet.com]
▶ Whats Driving the Recent Strength in Copper Prices?   [Aug-18-17 09:08AM  Market Realist]
▶ Inside Rio Tintos Copper Outlook   [Aug-11-17 09:08AM  Market Realist]
▶ Copper Enters First Bull Market in 4 Years   [Aug-08-17 12:06PM  Investopedia]
▶ Coppers Long-Term Outlook, Demand, and Supply   [08:06AM  Market Realist]
▶ Chart in Focus: Freeport-McMoRans 2Q17 Earnings   [Aug-07-17 07:36AM  Market Realist]
▶ Southern Copper misses 2Q profit forecasts   [Aug-03-17 10:51AM  Associated Press]
▶ Is Teck Resources Stock Overrated on Wall Street?   [Jul-21-17 12:05PM  Market Realist]
▶ Strong earthquake strikes off Peru, no damage seen   [Jul-17-17 11:58PM  Reuters]
▶ Why Freeport-McMoRan Inc (FCX) Stock Is Set for a Comeback   [Jul-13-17 09:27AM  InvestorPlace]
▶ Freeport Investors: What to Expect from Copper in 2H17   [Jul-07-17 03:36PM  Market Realist]
▶ Copper Is Rallying Off Support   [Jun-30-17 01:44PM  Forbes]
▶ How Are Analysts Rating Southern Copper in 2Q17?   [Jun-28-17 07:36AM  Market Realist]
▶ Why Analysts Expect Freeport-McMoRans 2Q17 Profits to Rise   [Jun-27-17 09:08AM  Market Realist]
▶ 3 Top Commodity Stocks for Investors   [Jun-26-17 06:12PM  Motley Fool]
▶ These Contrarian Views Could Leave Copper Bulls Heartbroken   [Jun-19-17 10:36AM  Market Realist]
▶ Mid-Year Review: What Could Drive Copper Miners in 2H17   [Jun-16-17 07:36AM  Market Realist]
▶ Chinas Copper Imports in May: What You Need to Know   [Jun-09-17 01:05PM  Market Realist]
▶ Freeport or Teck Resources: Which Offers a Valuation Upside?   [May-24-17 10:36AM  Market Realist]
Financial statements of SCCO
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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