Intrinsic value of Agnico Eagle Mines Limited - AEM

Previous Close

$53.55

  Intrinsic Value

$4.52

stock screener

  Rating & Target

str. sell

-92%

Previous close

$53.55

 
Intrinsic value

$4.52

 
Up/down potential

-92%

 
Rating

str. sell

We calculate the intrinsic value of AEM 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 0001), $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 12.6

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  4.90
  4.91
  4.92
  4.93
  4.93
  4.94
  4.95
  4.95
  4.96
  4.96
  4.97
  4.97
  4.97
  4.97
  4.98
  4.98
  4.98
  4.98
  4.98
  4.99
  4.99
  4.99
  4.99
  4.99
  4.99
  4.99
  4.99
  4.99
  4.99
  5.00
Revenue, $m
  2,353
  2,468
  2,590
  2,717
  2,852
  2,992
  3,140
  3,296
  3,459
  3,631
  3,811
  4,001
  4,200
  4,408
  4,628
  4,858
  5,100
  5,355
  5,621
  5,902
  6,196
  6,505
  6,830
  7,171
  7,529
  7,905
  8,299
  8,714
  9,149
  9,606
Variable operating expenses, $m
  2,105
  2,205
  2,310
  2,420
  2,536
  2,658
  2,786
  2,920
  3,062
  3,210
  3,296
  3,460
  3,632
  3,813
  4,003
  4,202
  4,411
  4,631
  4,862
  5,105
  5,359
  5,627
  5,907
  6,202
  6,512
  6,837
  7,178
  7,537
  7,913
  8,309
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
  2,105
  2,205
  2,310
  2,420
  2,536
  2,658
  2,786
  2,920
  3,062
  3,210
  3,296
  3,460
  3,632
  3,813
  4,003
  4,202
  4,411
  4,631
  4,862
  5,105
  5,359
  5,627
  5,907
  6,202
  6,512
  6,837
  7,178
  7,537
  7,913
  8,309
Operating income, $m
  248
  264
  280
  297
  315
  335
  354
  376
  398
  421
  515
  540
  567
  595
  625
  656
  689
  723
  759
  797
  837
  879
  923
  969
  1,017
  1,068
  1,121
  1,177
  1,236
  1,298
EBITDA, $m
  822
  862
  904
  949
  996
  1,045
  1,097
  1,151
  1,208
  1,268
  1,331
  1,397
  1,466
  1,539
  1,616
  1,696
  1,781
  1,870
  1,963
  2,061
  2,164
  2,272
  2,385
  2,504
  2,629
  2,760
  2,898
  3,043
  3,195
  3,354
Interest expense (income), $m
  71
  84
  92
  102
  111
  121
  132
  143
  155
  167
  180
  194
  208
  223
  239
  255
  272
  291
  310
  330
  351
  373
  397
  421
  447
  474
  502
  532
  563
  596
  630
Earnings before tax, $m
  164
  171
  179
  186
  194
  203
  211
  221
  231
  241
  321
  333
  344
  357
  370
  384
  398
  413
  429
  446
  464
  482
  501
  522
  543
  566
  589
  614
  640
  667
Tax expense, $m
  44
  46
  48
  50
  52
  55
  57
  60
  62
  65
  87
  90
  93
  96
  100
  104
  108
  112
  116
  120
  125
  130
  135
  141
  147
  153
  159
  166
  173
  180
Net income, $m
  120
  125
  130
  136
  142
  148
  154
  161
  168
  176
  235
  243
  251
  261
  270
  280
  291
  302
  313
  326
  338
  352
  366
  381
  396
  413
  430
  448
  467
  487

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $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 assets, $m
  7,791
  8,174
  8,576
  8,998
  9,442
  9,909
  10,399
  10,914
  11,455
  12,023
  12,620
  13,247
  13,906
  14,598
  15,324
  16,087
  16,889
  17,730
  18,614
  19,542
  20,517
  21,541
  22,615
  23,744
  24,930
  26,174
  27,481
  28,854
  30,295
  31,808
Adjusted assets (=assets-cash), $m
  7,791
  8,174
  8,576
  8,998
  9,442
  9,909
  10,399
  10,914
  11,455
  12,023
  12,620
  13,247
  13,906
  14,598
  15,324
  16,087
  16,889
  17,730
  18,614
  19,542
  20,517
  21,541
  22,615
  23,744
  24,930
  26,174
  27,481
  28,854
  30,295
  31,808
Revenue / Adjusted assets
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
Average production assets, $m
  5,995
  6,290
  6,599
  6,924
  7,266
  7,625
  8,002
  8,398
  8,815
  9,252
  9,711
  10,194
  10,700
  11,233
  11,792
  12,379
  12,996
  13,643
  14,323
  15,038
  15,788
  16,575
  17,403
  18,271
  19,183
  20,141
  21,147
  22,203
  23,312
  24,476
Working capital, $m
  381
  400
  420
  440
  462
  485
  509
  534
  560
  588
  617
  648
  680
  714
  750
  787
  826
  867
  911
  956
  1,004
  1,054
  1,106
  1,162
  1,220
  1,281
  1,344
  1,412
  1,482
  1,556
Total debt, $m
  1,514
  1,664
  1,822
  1,987
  2,161
  2,344
  2,536
  2,738
  2,950
  3,173
  3,407
  3,653
  3,911
  4,182
  4,467
  4,766
  5,080
  5,410
  5,757
  6,121
  6,503
  6,904
  7,325
  7,768
  8,232
  8,720
  9,233
  9,771
  10,336
  10,929
Total liabilities, $m
  3,054
  3,204
  3,362
  3,527
  3,701
  3,884
  4,076
  4,278
  4,490
  4,713
  4,947
  5,193
  5,451
  5,722
  6,007
  6,306
  6,620
  6,950
  7,297
  7,661
  8,043
  8,444
  8,865
  9,308
  9,772
  10,260
  10,773
  11,311
  11,876
  12,469
Total equity, $m
  4,737
  4,970
  5,214
  5,471
  5,741
  6,025
  6,323
  6,636
  6,965
  7,310
  7,673
  8,054
  8,455
  8,875
  9,317
  9,781
  10,268
  10,780
  11,317
  11,882
  12,474
  13,097
  13,750
  14,436
  15,157
  15,914
  16,709
  17,543
  18,419
  19,339
Total liabilities and equity, $m
  7,791
  8,174
  8,576
  8,998
  9,442
  9,909
  10,399
  10,914
  11,455
  12,023
  12,620
  13,247
  13,906
  14,597
  15,324
  16,087
  16,888
  17,730
  18,614
  19,543
  20,517
  21,541
  22,615
  23,744
  24,929
  26,174
  27,482
  28,854
  30,295
  31,808
Debt-to-equity ratio
  0.320
  0.330
  0.350
  0.360
  0.380
  0.390
  0.400
  0.410
  0.420
  0.430
  0.440
  0.450
  0.460
  0.470
  0.480
  0.490
  0.490
  0.500
  0.510
  0.520
  0.520
  0.530
  0.530
  0.540
  0.540
  0.550
  0.550
  0.560
  0.560
  0.570
Adjusted equity ratio
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  120
  125
  130
  136
  142
  148
  154
  161
  168
  176
  235
  243
  251
  261
  270
  280
  291
  302
  313
  326
  338
  352
  366
  381
  396
  413
  430
  448
  467
  487
Depreciation, amort., depletion, $m
  573
  598
  624
  652
  680
  710
  742
  775
  810
  847
  816
  857
  899
  944
  991
  1,040
  1,092
  1,146
  1,204
  1,264
  1,327
  1,393
  1,462
  1,535
  1,612
  1,693
  1,777
  1,866
  1,959
  2,057
Funds from operations, $m
  693
  723
  755
  788
  822
  858
  897
  937
  979
  1,023
  1,051
  1,099
  1,151
  1,204
  1,261
  1,320
  1,383
  1,448
  1,517
  1,589
  1,665
  1,745
  1,828
  1,916
  2,008
  2,105
  2,207
  2,314
  2,426
  2,544
Change in working capital, $m
  18
  19
  20
  21
  22
  23
  24
  25
  26
  28
  29
  31
  32
  34
  36
  37
  39
  41
  43
  45
  48
  50
  53
  55
  58
  61
  64
  67
  71
  74
Cash from operations, $m
  676
  705
  735
  767
  800
  836
  873
  911
  952
  995
  1,021
  1,069
  1,118
  1,171
  1,225
  1,283
  1,344
  1,407
  1,474
  1,544
  1,617
  1,695
  1,776
  1,861
  1,951
  2,044
  2,143
  2,247
  2,356
  2,470
Maintenance CAPEX, $m
  -480
  -504
  -529
  -555
  -582
  -611
  -641
  -672
  -706
  -741
  -777
  -816
  -857
  -899
  -944
  -991
  -1,040
  -1,092
  -1,146
  -1,204
  -1,264
  -1,327
  -1,393
  -1,462
  -1,535
  -1,612
  -1,693
  -1,777
  -1,866
  -1,959
New CAPEX, $m
  -281
  -294
  -309
  -325
  -342
  -359
  -377
  -396
  -416
  -437
  -459
  -483
  -507
  -532
  -559
  -587
  -617
  -648
  -680
  -714
  -750
  -788
  -827
  -869
  -912
  -958
  -1,006
  -1,056
  -1,109
  -1,164
Cash from investing activities, $m
  -761
  -798
  -838
  -880
  -924
  -970
  -1,018
  -1,068
  -1,122
  -1,178
  -1,236
  -1,299
  -1,364
  -1,431
  -1,503
  -1,578
  -1,657
  -1,740
  -1,826
  -1,918
  -2,014
  -2,115
  -2,220
  -2,331
  -2,447
  -2,570
  -2,699
  -2,833
  -2,975
  -3,123
Free cash flow, $m
  -85
  -94
  -103
  -113
  -123
  -134
  -145
  -157
  -170
  -183
  -215
  -230
  -245
  -261
  -278
  -295
  -313
  -333
  -353
  -374
  -396
  -420
  -444
  -470
  -497
  -525
  -555
  -586
  -619
  -654
Issuance/(repayment) of debt, $m
  139
  150
  158
  166
  174
  183
  192
  202
  212
  223
  234
  246
  258
  271
  285
  299
  314
  330
  346
  364
  382
  401
  421
  442
  465
  488
  512
  538
  565
  593
Issuance/(repurchase) of shares, $m
  104
  107
  114
  121
  128
  136
  144
  152
  161
  170
  128
  138
  149
  160
  172
  184
  197
  210
  224
  239
  254
  270
  288
  305
  324
  344
  365
  386
  409
  433
Cash from financing (excl. dividends), $m  
  243
  257
  272
  287
  302
  319
  336
  354
  373
  393
  362
  384
  407
  431
  457
  483
  511
  540
  570
  603
  636
  671
  709
  747
  789
  832
  877
  924
  974
  1,026
Total cash flow (excl. dividends), $m
  158
  164
  169
  174
  179
  185
  190
  197
  203
  210
  147
  154
  162
  170
  179
  188
  197
  207
  218
  229
  240
  252
  265
  278
  292
  306
  322
  338
  355
  373
Retained Cash Flow (-), $m
  -224
  -233
  -244
  -257
  -270
  -284
  -298
  -313
  -329
  -346
  -363
  -381
  -400
  -421
  -442
  -464
  -487
  -512
  -537
  -564
  -593
  -622
  -654
  -686
  -721
  -757
  -795
  -834
  -876
  -920
Prev. year cash balance distribution, $m
  434
  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
  368
  -69
  -76
  -83
  -91
  -99
  -108
  -117
  -126
  -136
  -216
  -227
  -238
  -250
  -263
  -276
  -290
  -304
  -320
  -336
  -353
  -370
  -389
  -408
  -429
  -450
  -473
  -496
  -521
  -547
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
  353
  -63
  -66
  -68
  -70
  -72
  -73
  -73
  -72
  -71
  -103
  -97
  -91
  -84
  -77
  -70
  -63
  -56
  -49
  -43
  -36
  -31
  -25
  -21
  -17
  -13
  -10
  -8
  -6
  -4
Current shareholders' claim on cash, %
  99.1
  98.2
  97.3
  96.5
  95.6
  94.7
  93.8
  93.0
  92.1
  91.2
  90.6
  89.9
  89.3
  88.6
  88.0
  87.3
  86.6
  85.9
  85.2
  84.5
  83.8
  83.1
  82.4
  81.7
  81.0
  80.3
  79.5
  78.8
  78.1
  77.4

Agnico Eagle Mines Ltd is a Canada-based gold producer with mining operations in northwestern Quebec, northern Mexico, northern Finland and Nunavut, as well as exploration activities in Canada, Europe, Latin America and the United States. It operates through the business units: Northern Business, which consists of its operations in Canada and Finland, such as the LaRonde mine, the Lapa mine, the Goldex mine, the Meadowbank mine, the Meliadine project and the Malartic Mine in Canada, as well as the Kittila mine in Finland; Southern Business, which consists of its operations in Mexico, such as the Pinos Altos mine that includes the Creston Mascota deposit and the La India mine owned by its indirect subsidiary, as well as Exploration Group, which focuses on the identification of new mineral reserves and mineral resources, and new development opportunities in gold producing regions. Its exploration activities are concentrated in Canada, Europe, Latin America and the United States.

FINANCIAL RATIOS  of  Agnico Eagle Mines Limited (AEM)

Valuation Ratios
P/E Ratio 75.8
Price to Sales 5.6
Price to Book 2.7
Price to Tangible Book
Price to Cash Flow 15.5
Price to Free Cash Flow 45.8
Growth Rates
Sales Growth Rate 7.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 14.7%
Cap. Spend. - 3 Yr. Gr. Rate -3.6%
Financial Strength
Quick Ratio 5
Current Ratio 0.2
LT Debt to Equity 23.9%
Total Debt to Equity 26.9%
Interest Coverage 5
Management Effectiveness
Return On Assets 2.9%
Ret/ On Assets - 3 Yr. Avg. 1.9%
Return On Total Capital 2.9%
Ret/ On T. Cap. - 3 Yr. Avg. 1.7%
Return On Equity 3.7%
Return On Equity - 3 Yr. Avg. 2.2%
Asset Turnover 0.3
Profitability Ratios
Gross Margin 51.7%
Gross Margin - 3 Yr. Avg. 49.5%
EBITDA Margin 44.5%
EBITDA Margin - 3 Yr. Avg. 39.8%
Operating Margin 16.8%
Oper. Margin - 3 Yr. Avg. 12.9%
Pre-Tax Margin 12.5%
Pre-Tax Margin - 3 Yr. Avg. 8.9%
Net Profit Margin 7.4%
Net Profit Margin - 3 Yr. Avg. 4.4%
Effective Tax Rate 40.7%
Eff/ Tax Rate - 3 Yr. Avg. 55.5%
Payout Ratio 44.7%

AEM stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the AEM stock intrinsic value calculation we used $2243 million for the last fiscal year's total revenue generated by Agnico Eagle Mines Limited. The default revenue input number comes from 0001 income statement of Agnico Eagle Mines Limited. 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 AEM stock valuation model: a) initial revenue growth rate of 4.9% 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 AEM is calculated based on our internal credit rating of Agnico Eagle Mines Limited, 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 Agnico Eagle Mines Limited.
    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 AEM stock the variable cost ratio is equal to 89.6%.

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 AEM 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 6.1% for Agnico Eagle Mines Limited.

Corporate tax rate of 27% is the nominal tax rate for Agnico Eagle Mines Limited. 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 AEM 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 AEM are equal to 254.8%.

Life of production assets of 11.9 years is the average useful life of capital assets used in Agnico Eagle Mines Limited 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 AEM is equal to 16.2%. 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 - $4946.991 million for Agnico Eagle Mines Limited - 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 235.186 million for Agnico Eagle Mines Limited 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 Agnico Eagle Mines Limited at the current share price and the inputted number of shares is $12.6 billion.

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