Intrinsic value of Caledonia Mining - CMCL

Previous Close

$5.93

  Intrinsic Value

$26.68

stock screener

  Rating & Target

str. buy

+350%

Previous close

$5.93

 
Intrinsic value

$26.68

 
Up/down potential

+350%

 
Rating

str. buy

We calculate the intrinsic value of CMCL 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 0.1

 

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, %
  12.50
  11.75
  11.08
  10.47
  9.92
  9.43
  8.99
  8.59
  8.23
  7.91
  7.62
  7.35
  7.12
  6.91
  6.72
  6.54
  6.39
  6.25
  6.13
  6.01
  5.91
  5.82
  5.74
  5.66
  5.60
  5.54
  5.48
  5.44
  5.39
  5.35
Revenue, $m
  78
  88
  97
  108
  118
  129
  141
  153
  166
  179
  193
  207
  221
  237
  253
  269
  286
  304
  323
  342
  362
  384
  406
  429
  453
  478
  504
  531
  560
  590
Variable operating expenses, $m
  45
  50
  56
  61
  68
  74
  81
  87
  95
  102
  110
  118
  126
  135
  144
  154
  163
  174
  184
  195
  207
  219
  232
  245
  258
  273
  288
  303
  320
  337
Fixed operating expenses, $m
  11
  11
  12
  12
  12
  13
  13
  13
  13
  14
  14
  14
  15
  15
  15
  16
  16
  16
  17
  17
  17
  18
  18
  19
  19
  19
  20
  20
  21
  21
Total operating expenses, $m
  56
  61
  68
  73
  80
  87
  94
  100
  108
  116
  124
  132
  141
  150
  159
  170
  179
  190
  201
  212
  224
  237
  250
  264
  277
  292
  308
  323
  341
  358
Operating income, $m
  22
  26
  30
  34
  38
  43
  48
  53
  58
  63
  69
  74
  80
  87
  93
  100
  107
  114
  122
  130
  138
  147
  156
  165
  175
  186
  196
  208
  220
  232
EBITDA, $m
  39
  45
  51
  57
  63
  70
  77
  85
  93
  101
  109
  118
  127
  136
  146
  156
  167
  178
  190
  202
  214
  227
  241
  255
  270
  286
  302
  319
  337
  356
Interest expense (income), $m
  0
  0
  0
  1
  1
  1
  2
  2
  3
  3
  4
  4
  5
  5
  6
  6
  7
  7
  8
  9
  9
  10
  11
  11
  12
  13
  14
  15
  16
  17
  18
Earnings before tax, $m
  22
  26
  29
  33
  37
  41
  45
  50
  55
  60
  65
  70
  75
  81
  87
  93
  100
  106
  113
  121
  128
  136
  144
  153
  162
  172
  182
  192
  203
  214
Tax expense, $m
  6
  7
  8
  9
  10
  11
  12
  13
  15
  16
  17
  19
  20
  22
  23
  25
  27
  29
  31
  33
  35
  37
  39
  41
  44
  46
  49
  52
  55
  58
Net income, $m
  16
  19
  21
  24
  27
  30
  33
  36
  40
  43
  47
  51
  55
  59
  64
  68
  73
  78
  83
  88
  94
  99
  105
  112
  118
  125
  133
  140
  148
  156

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
  123
  138
  153
  169
  186
  204
  222
  241
  261
  281
  303
  325
  348
  372
  397
  423
  450
  478
  508
  538
  570
  603
  638
  674
  712
  751
  792
  835
  880
  927
Adjusted assets (=assets-cash), $m
  123
  138
  153
  169
  186
  204
  222
  241
  261
  281
  303
  325
  348
  372
  397
  423
  450
  478
  508
  538
  570
  603
  638
  674
  712
  751
  792
  835
  880
  927
Revenue / Adjusted assets
  0.634
  0.638
  0.634
  0.639
  0.634
  0.632
  0.635
  0.635
  0.636
  0.637
  0.637
  0.637
  0.635
  0.637
  0.637
  0.636
  0.636
  0.636
  0.636
  0.636
  0.635
  0.637
  0.636
  0.636
  0.636
  0.636
  0.636
  0.636
  0.636
  0.636
Average production assets, $m
  82
  92
  102
  113
  124
  136
  148
  161
  174
  188
  202
  217
  232
  249
  265
  283
  301
  319
  339
  359
  381
  403
  426
  450
  475
  502
  529
  558
  588
  619
Working capital, $m
  1
  1
  1
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  8
  8
  8
  9
Total debt, $m
  7
  14
  20
  27
  34
  42
  49
  57
  66
  75
  84
  93
  103
  113
  124
  135
  146
  158
  171
  184
  197
  211
  226
  241
  257
  274
  292
  310
  329
  349
Total liabilities, $m
  52
  59
  65
  72
  79
  86
  94
  102
  111
  120
  129
  138
  148
  158
  169
  180
  191
  203
  216
  229
  242
  256
  271
  286
  302
  319
  337
  355
  374
  394
Total equity, $m
  71
  79
  88
  97
  107
  117
  128
  138
  150
  162
  174
  187
  200
  214
  228
  243
  259
  275
  292
  309
  328
  347
  367
  387
  409
  432
  455
  480
  506
  533
Total liabilities and equity, $m
  123
  138
  153
  169
  186
  203
  222
  240
  261
  282
  303
  325
  348
  372
  397
  423
  450
  478
  508
  538
  570
  603
  638
  673
  711
  751
  792
  835
  880
  927
Debt-to-equity ratio
  0.110
  0.170
  0.230
  0.280
  0.320
  0.350
  0.390
  0.410
  0.440
  0.460
  0.480
  0.500
  0.510
  0.530
  0.540
  0.550
  0.570
  0.580
  0.580
  0.590
  0.600
  0.610
  0.620
  0.620
  0.630
  0.630
  0.640
  0.650
  0.650
  0.650
Adjusted equity ratio
  0.575
  0.575
  0.575
  0.575
  0.575
  0.575
  0.575
  0.575
  0.575
  0.575
  0.575
  0.575
  0.575
  0.575
  0.575
  0.575
  0.575
  0.575
  0.575
  0.575
  0.575
  0.575
  0.575
  0.575
  0.575
  0.575
  0.575
  0.575
  0.575
  0.575

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  16
  19
  21
  24
  27
  30
  33
  36
  40
  43
  47
  51
  55
  59
  64
  68
  73
  78
  83
  88
  94
  99
  105
  112
  118
  125
  133
  140
  148
  156
Depreciation, amort., depletion, $m
  16
  18
  20
  23
  25
  27
  30
  32
  35
  38
  40
  43
  46
  50
  53
  57
  60
  64
  68
  72
  76
  81
  85
  90
  95
  100
  106
  112
  118
  124
Funds from operations, $m
  33
  37
  42
  47
  52
  57
  63
  69
  75
  81
  88
  94
  102
  109
  117
  125
  133
  142
  151
  160
  170
  180
  191
  202
  213
  226
  238
  252
  266
  280
Change in working capital, $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 from operations, $m
  33
  37
  42
  47
  52
  57
  63
  68
  75
  81
  87
  94
  101
  109
  116
  124
  133
  141
  150
  160
  169
  180
  190
  201
  213
  225
  238
  251
  265
  280
Maintenance CAPEX, $m
  -15
  -16
  -18
  -20
  -23
  -25
  -27
  -30
  -32
  -35
  -38
  -40
  -43
  -46
  -50
  -53
  -57
  -60
  -64
  -68
  -72
  -76
  -81
  -85
  -90
  -95
  -100
  -106
  -112
  -118
New CAPEX, $m
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -28
  -29
  -30
  -31
Cash from investing activities, $m
  -24
  -26
  -28
  -31
  -34
  -37
  -39
  -43
  -45
  -49
  -52
  -55
  -58
  -62
  -67
  -70
  -75
  -79
  -84
  -88
  -93
  -98
  -104
  -109
  -115
  -121
  -128
  -135
  -142
  -149
Free cash flow, $m
  9
  11
  13
  15
  18
  21
  23
  26
  29
  32
  36
  39
  42
  46
  50
  54
  58
  62
  67
  71
  76
  81
  87
  92
  98
  104
  110
  117
  124
  131
Issuance/(repayment) of debt, $m
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  11
  12
  12
  13
  14
  14
  15
  15
  16
  17
  18
  18
  19
  20
Issuance/(repurchase) of shares, $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 from financing (excl. dividends), $m  
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  11
  12
  12
  13
  14
  14
  15
  15
  16
  17
  18
  18
  19
  20
Total cash flow (excl. dividends), $m
  15
  17
  20
  22
  25
  28
  31
  34
  38
  41
  45
  48
  52
  56
  61
  65
  70
  74
  79
  84
  90
  95
  101
  107
  114
  121
  128
  135
  143
  151
Retained Cash Flow (-), $m
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
Prev. year cash balance distribution, $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 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
  7
  9
  11
  13
  15
  18
  21
  23
  26
  29
  32
  36
  39
  42
  46
  50
  54
  58
  62
  67
  72
  76
  81
  87
  92
  98
  104
  110
  117
  124
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
  7
  8
  9
  11
  12
  13
  14
  15
  15
  15
  15
  15
  15
  14
  14
  13
  12
  11
  10
  8
  7
  6
  5
  4
  4
  3
  2
  2
  1
  1
Current shareholders' claim on cash, %
  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

FINANCIAL RATIOS  of  Caledonia Mining (CMCL)

Valuation Ratios
P/E Ratio 0
Price to Sales 0
Price to Book 0
Price to Tangible Book
Price to Cash Flow 0
Price to Free Cash Flow 0
Growth Rates
Sales Growth Rate -100%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate NaN%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio NaN
Current Ratio NaN
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 0%
Ret/ On Assets - 3 Yr. Avg. 0%
Return On Total Capital 0%
Ret/ On T. Cap. - 3 Yr. Avg. 0%
Return On Equity 0%
Return On Equity - 3 Yr. Avg. 0%
Asset Turnover 0
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 0%
EBITDA Margin - 3 Yr. Avg. 0%
Operating Margin 0%
Oper. Margin - 3 Yr. Avg. 0%
Pre-Tax Margin 0%
Pre-Tax Margin - 3 Yr. Avg. 0%
Net Profit Margin 0%
Net Profit Margin - 3 Yr. Avg. 0%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio 0%

CMCL stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CMCL stock intrinsic value calculation we used $69.762 million for the last fiscal year's total revenue generated by Caledonia Mining. The default revenue input number comes from 0001 income statement of Caledonia Mining. 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 CMCL stock valuation model: a) initial revenue growth rate of 12.5% 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 CMCL is calculated based on our internal credit rating of Caledonia Mining, 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 Caledonia Mining.
    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 CMCL stock the variable cost ratio is equal to 57.1%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $11 million in the base year in the intrinsic value calculation for CMCL 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 5.4% for Caledonia Mining.

Corporate tax rate of 27% is the nominal tax rate for Caledonia Mining. 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 CMCL 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 CMCL are equal to 105%.

Life of production assets of 0 years is the average useful life of capital assets used in Caledonia Mining 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 CMCL is equal to 1.5%. 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 - $63.267 million for Caledonia Mining - 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 10.603 million for Caledonia Mining 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 Caledonia Mining at the current share price and the inputted number of shares is $0.1 billion.

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