Intrinsic value of Silver Standard Resources - SSRI

Previous Close

$9.56

  Intrinsic Value

$1.72

stock screener

  Rating & Target

str. sell

-82%

  Value-price divergence*

+119%

Previous close

$9.56

 
Intrinsic value

$1.72

 
Up/down potential

-82%

 
Rating

str. sell

 
Value-price divergence*

+119%

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

We calculate the intrinsic value of SSRI 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 1.2

 

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, %
  30.93
  15.70
  14.63
  13.67
  12.80
  12.02
  11.32
  10.69
  10.12
  9.61
  9.15
  8.73
  8.36
  8.02
  7.72
  7.45
  7.20
  6.98
  6.78
  6.61
  6.45
  6.30
  6.17
  6.05
  5.95
  5.85
  5.77
  5.69
  5.62
  5.56
  5.50
Revenue, $m
  491
  568
  651
  740
  835
  935
  1,041
  1,152
  1,269
  1,391
  1,518
  1,651
  1,789
  1,932
  2,081
  2,236
  2,397
  2,565
  2,739
  2,920
  3,108
  3,304
  3,508
  3,720
  3,941
  4,172
  4,413
  4,664
  4,926
  5,200
  5,486
Variable operating expenses, $m
 
  675
  773
  878
  989
  1,108
  1,232
  1,364
  1,501
  1,645
  1,795
  1,946
  2,108
  2,278
  2,453
  2,636
  2,826
  3,023
  3,229
  3,442
  3,664
  3,894
  4,135
  4,385
  4,646
  4,918
  5,202
  5,498
  5,807
  6,130
  6,467
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
  381
  675
  773
  878
  989
  1,108
  1,232
  1,364
  1,501
  1,645
  1,795
  1,946
  2,108
  2,278
  2,453
  2,636
  2,826
  3,023
  3,229
  3,442
  3,664
  3,894
  4,135
  4,385
  4,646
  4,918
  5,202
  5,498
  5,807
  6,130
  6,467
Operating income, $m
  110
  -107
  -121
  -137
  -154
  -172
  -191
  -211
  -232
  -254
  -276
  -295
  -320
  -345
  -372
  -400
  -429
  -459
  -490
  -522
  -556
  -591
  -627
  -665
  -705
  -746
  -789
  -834
  -881
  -930
  -981
EBITDA, $m
  186
  -43
  -49
  -56
  -63
  -71
  -79
  -87
  -96
  -105
  -115
  -125
  -135
  -146
  -157
  -169
  -181
  -194
  -207
  -221
  -235
  -250
  -265
  -281
  -298
  -315
  -334
  -353
  -372
  -393
  -415
Interest expense (income), $m
  8
  8
  11
  15
  18
  22
  26
  30
  35
  40
  45
  50
  55
  61
  66
  73
  79
  85
  92
  99
  106
  114
  122
  130
  139
  148
  157
  167
  177
  188
  199
Earnings before tax, $m
  81
  -115
  -133
  -152
  -173
  -194
  -217
  -241
  -267
  -293
  -321
  -345
  -375
  -406
  -439
  -472
  -507
  -544
  -582
  -621
  -662
  -705
  -749
  -795
  -844
  -894
  -946
  -1,001
  -1,058
  -1,117
  -1,180
Tax expense, $m
  16
  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
  65
  -115
  -133
  -152
  -173
  -194
  -217
  -241
  -267
  -293
  -321
  -345
  -375
  -406
  -439
  -472
  -507
  -544
  -582
  -621
  -662
  -705
  -749
  -795
  -844
  -894
  -946
  -1,001
  -1,058
  -1,117
  -1,180

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  476
  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
  1,439
  1,114
  1,277
  1,451
  1,637
  1,834
  2,042
  2,260
  2,488
  2,727
  2,977
  3,237
  3,507
  3,788
  4,081
  4,385
  4,701
  5,029
  5,370
  5,725
  6,094
  6,478
  6,878
  7,294
  7,728
  8,180
  8,652
  9,144
  9,659
  10,196
  10,757
Adjusted assets (=assets-cash), $m
  963
  1,114
  1,277
  1,451
  1,637
  1,834
  2,042
  2,260
  2,488
  2,727
  2,977
  3,237
  3,507
  3,788
  4,081
  4,385
  4,701
  5,029
  5,370
  5,725
  6,094
  6,478
  6,878
  7,294
  7,728
  8,180
  8,652
  9,144
  9,659
  10,196
  10,757
Revenue / Adjusted assets
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
Average production assets, $m
  507
  586
  672
  764
  862
  965
  1,074
  1,189
  1,310
  1,435
  1,567
  1,704
  1,846
  1,994
  2,148
  2,308
  2,474
  2,647
  2,826
  3,013
  3,207
  3,409
  3,620
  3,839
  4,067
  4,305
  4,554
  4,813
  5,084
  5,366
  5,662
Working capital, $m
  560
  97
  111
  127
  143
  160
  178
  197
  217
  238
  260
  282
  306
  330
  356
  382
  410
  439
  468
  499
  531
  565
  600
  636
  674
  713
  755
  797
  842
  889
  938
Total debt, $m
  220
  305
  395
  493
  597
  706
  822
  944
  1,071
  1,205
  1,344
  1,489
  1,640
  1,797
  1,960
  2,130
  2,306
  2,489
  2,680
  2,878
  3,083
  3,298
  3,521
  3,753
  3,995
  4,248
  4,511
  4,786
  5,073
  5,372
  5,685
Total liabilities, $m
  537
  622
  712
  810
  914
  1,023
  1,139
  1,261
  1,388
  1,522
  1,661
  1,806
  1,957
  2,114
  2,277
  2,447
  2,623
  2,806
  2,997
  3,195
  3,400
  3,615
  3,838
  4,070
  4,312
  4,565
  4,828
  5,103
  5,390
  5,689
  6,002
Total equity, $m
  902
  492
  564
  642
  724
  811
  902
  999
  1,100
  1,205
  1,316
  1,431
  1,550
  1,675
  1,804
  1,938
  2,078
  2,223
  2,374
  2,530
  2,694
  2,863
  3,040
  3,224
  3,416
  3,616
  3,824
  4,042
  4,269
  4,506
  4,754
Total liabilities and equity, $m
  1,439
  1,114
  1,276
  1,452
  1,638
  1,834
  2,041
  2,260
  2,488
  2,727
  2,977
  3,237
  3,507
  3,789
  4,081
  4,385
  4,701
  5,029
  5,371
  5,725
  6,094
  6,478
  6,878
  7,294
  7,728
  8,181
  8,652
  9,145
  9,659
  10,195
  10,756
Debt-to-equity ratio
  0.244
  0.620
  0.700
  0.770
  0.820
  0.870
  0.910
  0.950
  0.970
  1.000
  1.020
  1.040
  1.060
  1.070
  1.090
  1.100
  1.110
  1.120
  1.130
  1.140
  1.140
  1.150
  1.160
  1.160
  1.170
  1.170
  1.180
  1.180
  1.190
  1.190
  1.200
Adjusted equity ratio
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442
  0.442

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  65
  -115
  -133
  -152
  -173
  -194
  -217
  -241
  -267
  -293
  -321
  -345
  -375
  -406
  -439
  -472
  -507
  -544
  -582
  -621
  -662
  -705
  -749
  -795
  -844
  -894
  -946
  -1,001
  -1,058
  -1,117
  -1,180
Depreciation, amort., depletion, $m
  76
  64
  72
  81
  91
  102
  112
  124
  136
  149
  162
  170
  185
  199
  215
  231
  247
  265
  283
  301
  321
  341
  362
  384
  407
  431
  455
  481
  508
  537
  566
Funds from operations, $m
  152
  -51
  -61
  -71
  -81
  -93
  -105
  -118
  -131
  -145
  -159
  -175
  -190
  -207
  -224
  -242
  -260
  -279
  -299
  -320
  -341
  -364
  -387
  -412
  -437
  -463
  -491
  -520
  -550
  -581
  -614
Change in working capital, $m
  -19
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  30
  31
  32
  33
  35
  36
  38
  39
  41
  43
  45
  47
  49
Cash from operations, $m
  171
  -64
  -75
  -86
  -98
  -110
  -123
  -137
  -151
  -166
  -181
  -197
  -214
  -231
  -249
  -268
  -288
  -308
  -329
  -351
  -374
  -397
  -422
  -448
  -475
  -503
  -532
  -562
  -594
  -628
  -663
Maintenance CAPEX, $m
  0
  -51
  -59
  -67
  -76
  -86
  -97
  -107
  -119
  -131
  -144
  -157
  -170
  -185
  -199
  -215
  -231
  -247
  -265
  -283
  -301
  -321
  -341
  -362
  -384
  -407
  -431
  -455
  -481
  -508
  -537
New CAPEX, $m
  -48
  -80
  -86
  -92
  -98
  -104
  -109
  -115
  -120
  -126
  -131
  -137
  -142
  -148
  -154
  -160
  -166
  -173
  -180
  -187
  -194
  -202
  -210
  -219
  -228
  -238
  -248
  -259
  -271
  -283
  -295
Cash from investing activities, $m
  -43
  -131
  -145
  -159
  -174
  -190
  -206
  -222
  -239
  -257
  -275
  -294
  -312
  -333
  -353
  -375
  -397
  -420
  -445
  -470
  -495
  -523
  -551
  -581
  -612
  -645
  -679
  -714
  -752
  -791
  -832
Free cash flow, $m
  128
  -195
  -219
  -245
  -272
  -300
  -329
  -359
  -390
  -422
  -456
  -491
  -527
  -564
  -603
  -643
  -685
  -728
  -773
  -820
  -869
  -920
  -973
  -1,029
  -1,087
  -1,148
  -1,211
  -1,277
  -1,346
  -1,419
  -1,495
Issuance/(repayment) of debt, $m
  -18
  85
  91
  97
  104
  110
  116
  122
  128
  133
  139
  145
  151
  157
  163
  170
  176
  183
  190
  198
  206
  214
  223
  232
  242
  252
  263
  275
  287
  300
  313
Issuance/(repurchase) of shares, $m
  7
  181
  205
  229
  255
  281
  309
  338
  368
  399
  431
  460
  495
  531
  568
  607
  647
  689
  733
  778
  825
  875
  926
  979
  1,035
  1,094
  1,155
  1,218
  1,285
  1,355
  1,428
Cash from financing (excl. dividends), $m  
  -11
  266
  296
  326
  359
  391
  425
  460
  496
  532
  570
  605
  646
  688
  731
  777
  823
  872
  923
  976
  1,031
  1,089
  1,149
  1,211
  1,277
  1,346
  1,418
  1,493
  1,572
  1,655
  1,741
Total cash flow (excl. dividends), $m
  115
  71
  77
  82
  87
  91
  96
  101
  105
  110
  115
  114
  119
  124
  128
  133
  139
  144
  150
  156
  162
  169
  176
  183
  191
  199
  207
  216
  226
  236
  246
Retained Cash Flow (-), $m
  -455
  -181
  -205
  -229
  -255
  -281
  -309
  -338
  -368
  -399
  -431
  -460
  -495
  -531
  -568
  -607
  -647
  -689
  -733
  -778
  -825
  -875
  -926
  -979
  -1,035
  -1,094
  -1,155
  -1,218
  -1,285
  -1,355
  -1,428
Prev. year cash balance distribution, $m
 
  476
  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
 
  366
  -128
  -147
  -168
  -190
  -213
  -237
  -263
  -289
  -317
  -346
  -376
  -407
  -440
  -473
  -508
  -545
  -583
  -622
  -663
  -706
  -750
  -797
  -845
  -895
  -948
  -1,002
  -1,059
  -1,119
  -1,181
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
 
  351
  -117
  -128
  -138
  -147
  -155
  -160
  -164
  -166
  -166
  -164
  -160
  -155
  -148
  -139
  -129
  -119
  -107
  -96
  -84
  -73
  -62
  -52
  -43
  -35
  -28
  -22
  -16
  -12
  -9
Current shareholders' claim on cash, %
  100
  75.5
  57.3
  43.8
  33.6
  25.9
  20.1
  15.6
  12.2
  9.6
  7.5
  5.9
  4.7
  3.7
  3.0
  2.4
  1.9
  1.5
  1.2
  1.0
  0.8
  0.6
  0.5
  0.4
  0.3
  0.3
  0.2
  0.2
  0.1
  0.1
  0.1

Silver Standard Resources Inc. engages in the acquisition, exploration, development, and operation of precious metal resource properties in the Americas. The company primarily explores for gold, silver, zinc, and lead deposits. Its principal projects include the Marigold mine located in Humboldt County, Nevada, the United States; and the Pirquitas mine located in the province of Jujuy, northern Argentina. The company was formerly known as Consolidated Silver Standard Mines Limited and changed its name to Silver Standard Resources Inc. in April 1990. Silver Standard Resources Inc. was founded in 1946 and is based in Vancouver, Canada.

FINANCIAL RATIOS  of  Silver Standard Resources (SSRI)

Valuation Ratios
P/E Ratio 17.6
Price to Sales 2.3
Price to Book 1.3
Price to Tangible Book
Price to Cash Flow 6.7
Price to Free Cash Flow 9.3
Growth Rates
Sales Growth Rate 30.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -4%
Cap. Spend. - 3 Yr. Gr. Rate 5.9%
Financial Strength
Quick Ratio NaN
Current Ratio 0.1
LT Debt to Equity 24.4%
Total Debt to Equity 24.4%
Interest Coverage 11
Management Effectiveness
Return On Assets 6.2%
Ret/ On Assets - 3 Yr. Avg. -5.9%
Return On Total Capital 7.3%
Ret/ On T. Cap. - 3 Yr. Avg. -8.4%
Return On Equity 9.6%
Return On Equity - 3 Yr. Avg. -11.5%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 32.6%
Gross Margin - 3 Yr. Avg. 16.9%
EBITDA Margin 33.6%
EBITDA Margin - 3 Yr. Avg. 3.9%
Operating Margin 22.4%
Oper. Margin - 3 Yr. Avg. -5.3%
Pre-Tax Margin 16.5%
Pre-Tax Margin - 3 Yr. Avg. -15.3%
Net Profit Margin 13.2%
Net Profit Margin - 3 Yr. Avg. -20.6%
Effective Tax Rate 19.8%
Eff/ Tax Rate - 3 Yr. Avg. -6.8%
Payout Ratio 0%

SSRI stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the SSRI stock intrinsic value calculation we used $491 million for the last fiscal year's total revenue generated by Silver Standard Resources. The default revenue input number comes from 2016 income statement of Silver Standard Resources. 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 SSRI stock valuation model: a) initial revenue growth rate of 15.7% 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 SSRI is calculated based on our internal credit rating of Silver Standard Resources, 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 Silver Standard Resources.
    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 SSRI stock the variable cost ratio is equal to 118.9%.

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 SSRI 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 3.7% for Silver Standard Resources.

Corporate tax rate of 27% is the nominal tax rate for Silver Standard Resources. 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 SSRI 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 SSRI are equal to 103.2%.

Life of production assets of 10 years is the average useful life of capital assets used in Silver Standard Resources 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 SSRI is equal to 17.1%. 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 - $902 million for Silver Standard Resources - 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 123.776 million for Silver Standard Resources 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 Silver Standard Resources at the current share price and the inputted number of shares is $1.2 billion.

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Stock chart of SSRI Financial statements of SSRI
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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