Intrinsic value of Endeavour Silver - EXK

Previous Close

$1.95

  Intrinsic Value

$0.80

stock screener

  Rating & Target

str. sell

-59%

Previous close

$1.95

 
Intrinsic value

$0.80

 
Up/down potential

-59%

 
Rating

str. sell

We calculate the intrinsic value of EXK 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 0.2

 

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, %
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  154
  157
  161
  166
  171
  176
  182
  189
  196
  203
  211
  220
  229
  239
  249
  260
  271
  284
  296
  310
  324
  340
  356
  372
  390
  409
  428
  449
  471
  494
Variable operating expenses, $m
  135
  138
  142
  146
  150
  155
  160
  166
  172
  179
  186
  193
  201
  210
  219
  229
  239
  249
  261
  273
  285
  299
  313
  328
  343
  360
  377
  395
  414
  434
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
  135
  138
  142
  146
  150
  155
  160
  166
  172
  179
  186
  193
  201
  210
  219
  229
  239
  249
  261
  273
  285
  299
  313
  328
  343
  360
  377
  395
  414
  434
Operating income, $m
  18
  19
  19
  20
  20
  21
  22
  23
  23
  24
  25
  26
  27
  29
  30
  31
  33
  34
  36
  37
  39
  41
  43
  45
  47
  49
  51
  54
  56
  59
EBITDA, $m
  34
  35
  36
  37
  38
  39
  41
  42
  44
  45
  47
  49
  51
  53
  56
  58
  61
  63
  66
  69
  72
  76
  79
  83
  87
  91
  96
  100
  105
  110
Interest expense (income), $m
  1
  0
  0
  0
  0
  1
  1
  1
  1
  1
  2
  2
  2
  2
  3
  3
  3
  4
  4
  5
  5
  5
  6
  6
  7
  8
  8
  9
  9
  10
  11
Earnings before tax, $m
  18
  19
  19
  19
  20
  20
  21
  22
  22
  23
  24
  24
  25
  26
  27
  28
  29
  30
  31
  32
  33
  35
  36
  38
  39
  41
  43
  44
  46
  48
Tax expense, $m
  5
  5
  5
  5
  5
  6
  6
  6
  6
  6
  6
  7
  7
  7
  7
  8
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  11
  12
  13
  13
Net income, $m
  13
  14
  14
  14
  15
  15
  15
  16
  16
  17
  17
  18
  18
  19
  20
  20
  21
  22
  23
  24
  24
  25
  26
  28
  29
  30
  31
  32
  34
  35

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
  165
  169
  173
  178
  184
  190
  196
  203
  211
  219
  227
  237
  246
  257
  268
  280
  292
  305
  319
  334
  349
  365
  383
  401
  420
  440
  461
  483
  507
  531
Adjusted assets (=assets-cash), $m
  165
  169
  173
  178
  184
  190
  196
  203
  211
  219
  227
  237
  246
  257
  268
  280
  292
  305
  319
  334
  349
  365
  383
  401
  420
  440
  461
  483
  507
  531
Revenue / Adjusted assets
  0.933
  0.929
  0.931
  0.933
  0.929
  0.926
  0.929
  0.931
  0.929
  0.927
  0.930
  0.928
  0.931
  0.930
  0.929
  0.929
  0.928
  0.931
  0.928
  0.928
  0.928
  0.932
  0.930
  0.928
  0.929
  0.930
  0.928
  0.930
  0.929
  0.930
Average production assets, $m
  79
  81
  83
  86
  88
  91
  94
  98
  101
  105
  109
  114
  118
  123
  129
  134
  140
  147
  153
  160
  168
  176
  184
  193
  202
  211
  221
  232
  243
  255
Working capital, $m
  27
  28
  29
  30
  31
  32
  33
  34
  35
  36
  38
  39
  41
  43
  45
  46
  49
  51
  53
  55
  58
  61
  64
  67
  70
  73
  77
  80
  84
  88
Total debt, $m
  1
  2
  2
  3
  4
  6
  7
  8
  10
  11
  13
  15
  17
  19
  21
  24
  26
  29
  31
  34
  37
  41
  44
  48
  51
  55
  60
  64
  69
  74
Total liabilities, $m
  33
  34
  35
  35
  37
  38
  39
  40
  42
  44
  45
  47
  49
  51
  53
  56
  58
  61
  63
  66
  69
  73
  76
  80
  84
  88
  92
  96
  101
  106
Total equity, $m
  132
  135
  139
  143
  147
  152
  157
  163
  169
  175
  182
  189
  197
  206
  215
  224
  234
  244
  256
  267
  280
  293
  307
  321
  336
  352
  369
  387
  406
  426
Total liabilities and equity, $m
  165
  169
  174
  178
  184
  190
  196
  203
  211
  219
  227
  236
  246
  257
  268
  280
  292
  305
  319
  333
  349
  366
  383
  401
  420
  440
  461
  483
  507
  532
Debt-to-equity ratio
  0.010
  0.010
  0.020
  0.020
  0.030
  0.040
  0.040
  0.050
  0.060
  0.070
  0.070
  0.080
  0.090
  0.090
  0.100
  0.110
  0.110
  0.120
  0.120
  0.130
  0.130
  0.140
  0.140
  0.150
  0.150
  0.160
  0.160
  0.170
  0.170
  0.170
Adjusted equity ratio
  0.801
  0.801
  0.801
  0.801
  0.801
  0.801
  0.801
  0.801
  0.801
  0.801
  0.801
  0.801
  0.801
  0.801
  0.801
  0.801
  0.801
  0.801
  0.801
  0.801
  0.801
  0.801
  0.801
  0.801
  0.801
  0.801
  0.801
  0.801
  0.801
  0.801

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  13
  14
  14
  14
  15
  15
  15
  16
  16
  17
  17
  18
  18
  19
  20
  20
  21
  22
  23
  24
  24
  25
  26
  28
  29
  30
  31
  32
  34
  35
Depreciation, amort., depletion, $m
  16
  16
  17
  17
  18
  18
  19
  20
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  31
  32
  34
  35
  37
  39
  40
  42
  44
  46
  49
  51
Funds from operations, $m
  29
  30
  31
  31
  32
  33
  34
  35
  36
  38
  39
  40
  42
  44
  45
  47
  49
  51
  53
  56
  58
  61
  63
  66
  69
  72
  75
  79
  82
  86
Change in working capital, $m
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
Cash from operations, $m
  29
  29
  30
  31
  31
  32
  33
  34
  35
  36
  38
  39
  40
  42
  43
  45
  47
  49
  51
  53
  55
  58
  60
  63
  66
  69
  72
  75
  79
  82
Maintenance CAPEX, $m
  -16
  -16
  -16
  -17
  -17
  -18
  -18
  -19
  -20
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -31
  -32
  -34
  -35
  -37
  -39
  -40
  -42
  -44
  -46
  -49
New CAPEX, $m
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
Cash from investing activities, $m
  -18
  -18
  -18
  -19
  -20
  -21
  -21
  -22
  -24
  -24
  -25
  -26
  -28
  -29
  -30
  -32
  -33
  -34
  -36
  -38
  -39
  -42
  -43
  -46
  -48
  -50
  -52
  -55
  -57
  -61
Free cash flow, $m
  11
  12
  12
  12
  12
  12
  12
  12
  12
  12
  12
  13
  13
  13
  13
  14
  14
  15
  15
  15
  16
  16
  17
  18
  18
  19
  19
  20
  21
  22
Issuance/(repayment) of debt, $m
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
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  
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
Total cash flow (excl. dividends), $m
  12
  12
  12
  13
  13
  13
  13
  13
  14
  14
  14
  14
  15
  15
  16
  16
  17
  17
  18
  18
  19
  20
  20
  21
  22
  23
  24
  25
  26
  27
Retained Cash Flow (-), $m
  -3
  -3
  -3
  -4
  -4
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -19
  -20
Prev. year cash balance distribution, $m
  17
  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
  26
  9
  9
  9
  8
  8
  8
  8
  7
  7
  7
  7
  7
  7
  7
  7
  7
  7
  7
  7
  7
  7
  7
  7
  7
  7
  7
  7
  7
  7
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
  25
  8
  8
  7
  6
  6
  5
  5
  4
  4
  3
  3
  3
  2
  2
  2
  1
  1
  1
  1
  1
  1
  0
  0
  0
  0
  0
  0
  0
  0
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

Endeavour Silver Corp. is engaged in silver mining in Mexico, and related activities, including property acquisition, exploration, development, mineral extraction, processing, refining and reclamation. The Company is engaged in exploration activities in Chile. The Company's operating mining segments include Guanacevi, Bolanitos and El Cubo, which are located in Mexico, as well as Exploration and Corporate segments. The Exploration segment consists of projects in the exploration and evaluation phases in Mexico and Chile. The Company produces silver-gold from its underground mines at Guanacevi, Bolanitos and El Cubo in Mexico. Its exploration projects include Guadalupe y Calvo, Parral Mine, Terronera and Lourdes. The Company conducts its business primarily in Mexico through its subsidiary companies, such as Endeavour Gold Corporation, S.A. de C.V., Minera Plata Adelante, S.A. de C.V., Refinadora Plata Guanacevi, S.A. de C.V., Minas Lupycal S.A. de C.V. and MXRT Holdings Inc.

FINANCIAL RATIOS  of  Endeavour Silver (EXK)

Valuation Ratios
P/E Ratio 62
Price to Sales 1.6
Price to Book 1.9
Price to Tangible Book
Price to Cash Flow 10.8
Price to Free Cash Flow 82.6
Growth Rates
Sales Growth Rate -14.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -44.4%
Cap. Spend. - 3 Yr. Gr. Rate -25.8%
Financial Strength
Quick Ratio 8
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 6.8%
Interest Coverage 13
Management Effectiveness
Return On Assets 2.9%
Ret/ On Assets - 3 Yr. Avg. -33%
Return On Total Capital 3.7%
Ret/ On T. Cap. - 3 Yr. Avg. -42.5%
Return On Equity 4.3%
Return On Equity - 3 Yr. Avg. -50.9%
Asset Turnover 1.1
Profitability Ratios
Gross Margin 24.8%
Gross Margin - 3 Yr. Avg. 13.7%
EBITDA Margin 17.2%
EBITDA Margin - 3 Yr. Avg. -19.2%
Operating Margin 12.1%
Oper. Margin - 3 Yr. Avg. -36%
Pre-Tax Margin 7.6%
Pre-Tax Margin - 3 Yr. Avg. -39.4%
Net Profit Margin 2.5%
Net Profit Margin - 3 Yr. Avg. -39%
Effective Tax Rate 66.7%
Eff/ Tax Rate - 3 Yr. Avg. 27.6%
Payout Ratio 0%

EXK stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the EXK stock intrinsic value calculation we used $150.499 million for the last fiscal year's total revenue generated by Endeavour Silver. The default revenue input number comes from 0001 income statement of Endeavour Silver. 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 EXK stock valuation model: a) initial revenue growth rate of 2% 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 EXK is calculated based on our internal credit rating of Endeavour Silver, 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 Endeavour Silver.
    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 EXK stock the variable cost ratio is equal to 88%.

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 EXK 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 15.9% for Endeavour Silver.

Corporate tax rate of 27% is the nominal tax rate for Endeavour Silver. 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 EXK 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 EXK are equal to 51.7%.

Life of production assets of 4.6 years is the average useful life of capital assets used in Endeavour Silver 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 EXK is equal to 17.9%. 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 - $146.517 million for Endeavour Silver - 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 127.488 million for Endeavour Silver 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 Endeavour Silver at the current share price and the inputted number of shares is $0.2 billion.

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