Intrinsic value of Fortuna Silver Mines Inc. - FSM

Previous Close

$2.60

  Intrinsic Value

$9.77

stock screener

  Rating & Target

str. buy

+276%

Previous close

$2.60

 
Intrinsic value

$9.77

 
Up/down potential

+276%

 
Rating

str. buy

We calculate the intrinsic value of FSM 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 0.4

 

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, %
  27.50
  25.25
  23.23
  21.40
  19.76
  18.29
  16.96
  15.76
  14.69
  13.72
  12.85
  12.06
  11.35
  10.72
  10.15
  9.63
  9.17
  8.75
  8.38
  8.04
  7.74
  7.46
  7.22
  6.99
  6.79
  6.62
  6.45
  6.31
  6.18
  6.06
Revenue, $m
  342
  428
  527
  640
  767
  907
  1,061
  1,228
  1,408
  1,602
  1,807
  2,025
  2,255
  2,497
  2,750
  3,015
  3,292
  3,580
  3,880
  4,192
  4,516
  4,853
  5,203
  5,567
  5,945
  6,338
  6,747
  7,173
  7,616
  8,078
Variable operating expenses, $m
  143
  179
  220
  268
  321
  379
  443
  513
  589
  669
  755
  847
  943
  1,044
  1,150
  1,260
  1,376
  1,496
  1,622
  1,752
  1,888
  2,028
  2,175
  2,327
  2,485
  2,649
  2,820
  2,998
  3,184
  3,376
Fixed operating expenses, $m
  77
  78
  80
  82
  84
  85
  87
  89
  91
  93
  95
  97
  100
  102
  104
  106
  109
  111
  113
  116
  118
  121
  124
  126
  129
  132
  135
  138
  141
  144
Total operating expenses, $m
  220
  257
  300
  350
  405
  464
  530
  602
  680
  762
  850
  944
  1,043
  1,146
  1,254
  1,366
  1,485
  1,607
  1,735
  1,868
  2,006
  2,149
  2,299
  2,453
  2,614
  2,781
  2,955
  3,136
  3,325
  3,520
Operating income, $m
  122
  171
  227
  291
  363
  442
  530
  625
  728
  839
  957
  1,081
  1,213
  1,351
  1,497
  1,649
  1,807
  1,972
  2,145
  2,324
  2,510
  2,703
  2,904
  3,113
  3,331
  3,557
  3,792
  4,037
  4,292
  4,557
EBITDA, $m
  176
  239
  311
  392
  484
  586
  698
  820
  952
  1,093
  1,243
  1,403
  1,571
  1,748
  1,933
  2,127
  2,329
  2,540
  2,760
  2,989
  3,226
  3,473
  3,730
  3,997
  4,274
  4,562
  4,863
  5,175
  5,500
  5,839
Interest expense (income), $m
  0
  2
  4
  7
  10
  13
  16
  20
  25
  30
  35
  40
  46
  52
  59
  66
  73
  81
  89
  97
  106
  114
  124
  133
  143
  154
  165
  176
  188
  200
  212
Earnings before tax, $m
  120
  166
  220
  281
  350
  426
  510
  601
  699
  804
  916
  1,035
  1,160
  1,292
  1,431
  1,575
  1,726
  1,884
  2,048
  2,218
  2,395
  2,579
  2,771
  2,970
  3,177
  3,392
  3,616
  3,849
  4,092
  4,345
Tax expense, $m
  32
  45
  59
  76
  94
  115
  138
  162
  189
  217
  247
  279
  313
  349
  386
  425
  466
  509
  553
  599
  647
  696
  748
  802
  858
  916
  976
  1,039
  1,105
  1,173
Net income, $m
  88
  122
  161
  205
  255
  311
  372
  438
  510
  587
  669
  756
  847
  943
  1,044
  1,150
  1,260
  1,375
  1,495
  1,619
  1,749
  1,883
  2,023
  2,168
  2,319
  2,476
  2,640
  2,810
  2,987
  3,172

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
  705
  882
  1,087
  1,320
  1,581
  1,870
  2,187
  2,532
  2,904
  3,302
  3,726
  4,176
  4,650
  5,148
  5,671
  6,217
  6,787
  7,381
  7,999
  8,642
  9,311
  10,006
  10,728
  11,478
  12,258
  13,069
  13,912
  14,790
  15,703
  16,655
Adjusted assets (=assets-cash), $m
  705
  882
  1,087
  1,320
  1,581
  1,870
  2,187
  2,532
  2,904
  3,302
  3,726
  4,176
  4,650
  5,148
  5,671
  6,217
  6,787
  7,381
  7,999
  8,642
  9,311
  10,006
  10,728
  11,478
  12,258
  13,069
  13,912
  14,790
  15,703
  16,655
Revenue / Adjusted assets
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
  0.485
Average production assets, $m
  526
  659
  812
  985
  1,180
  1,396
  1,633
  1,890
  2,167
  2,465
  2,781
  3,117
  3,471
  3,843
  4,233
  4,640
  5,066
  5,509
  5,971
  6,451
  6,950
  7,468
  8,007
  8,567
  9,149
  9,755
  10,384
  11,039
  11,721
  12,431
Working capital, $m
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -3
  -3
  -4
  -4
  -5
  -5
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -10
  -10
  -11
  -12
  -13
  -13
  -14
  -15
  -16
Total debt, $m
  80
  125
  178
  238
  305
  379
  461
  549
  645
  747
  856
  972
  1,094
  1,222
  1,356
  1,496
  1,643
  1,796
  1,954
  2,120
  2,291
  2,470
  2,656
  2,848
  3,049
  3,257
  3,474
  3,700
  3,934
  4,179
Total liabilities, $m
  181
  227
  279
  339
  406
  481
  562
  651
  746
  849
  958
  1,073
  1,195
  1,323
  1,457
  1,598
  1,744
  1,897
  2,056
  2,221
  2,393
  2,571
  2,757
  2,950
  3,150
  3,359
  3,575
  3,801
  4,036
  4,280
Total equity, $m
  523
  656
  808
  981
  1,175
  1,389
  1,625
  1,881
  2,157
  2,453
  2,769
  3,103
  3,455
  3,825
  4,213
  4,619
  5,043
  5,484
  5,943
  6,421
  6,918
  7,434
  7,971
  8,528
  9,107
  9,710
  10,337
  10,989
  11,668
  12,375
Total liabilities and equity, $m
  704
  883
  1,087
  1,320
  1,581
  1,870
  2,187
  2,532
  2,903
  3,302
  3,727
  4,176
  4,650
  5,148
  5,670
  6,217
  6,787
  7,381
  7,999
  8,642
  9,311
  10,005
  10,728
  11,478
  12,257
  13,069
  13,912
  14,790
  15,704
  16,655
Debt-to-equity ratio
  0.150
  0.190
  0.220
  0.240
  0.260
  0.270
  0.280
  0.290
  0.300
  0.300
  0.310
  0.310
  0.320
  0.320
  0.320
  0.320
  0.330
  0.330
  0.330
  0.330
  0.330
  0.330
  0.330
  0.330
  0.330
  0.340
  0.340
  0.340
  0.340
  0.340
Adjusted equity ratio
  0.743
  0.743
  0.743
  0.743
  0.743
  0.743
  0.743
  0.743
  0.743
  0.743
  0.743
  0.743
  0.743
  0.743
  0.743
  0.743
  0.743
  0.743
  0.743
  0.743
  0.743
  0.743
  0.743
  0.743
  0.743
  0.743
  0.743
  0.743
  0.743
  0.743

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  88
  122
  161
  205
  255
  311
  372
  438
  510
  587
  669
  756
  847
  943
  1,044
  1,150
  1,260
  1,375
  1,495
  1,619
  1,749
  1,883
  2,023
  2,168
  2,319
  2,476
  2,640
  2,810
  2,987
  3,172
Depreciation, amort., depletion, $m
  54
  68
  84
  102
  122
  144
  168
  195
  223
  254
  287
  321
  358
  396
  436
  478
  522
  568
  616
  665
  716
  770
  825
  883
  943
  1,006
  1,071
  1,138
  1,208
  1,282
Funds from operations, $m
  142
  189
  244
  307
  377
  455
  540
  633
  734
  841
  956
  1,077
  1,205
  1,340
  1,481
  1,628
  1,782
  1,943
  2,110
  2,284
  2,465
  2,653
  2,848
  3,051
  3,262
  3,482
  3,710
  3,948
  4,195
  4,453
Change in working capital, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
Cash from operations, $m
  142
  190
  245
  307
  377
  455
  541
  634
  734
  841
  956
  1,077
  1,205
  1,340
  1,481
  1,629
  1,783
  1,944
  2,111
  2,285
  2,466
  2,654
  2,849
  3,052
  3,263
  3,483
  3,711
  3,949
  4,196
  4,454
Maintenance CAPEX, $m
  -43
  -54
  -68
  -84
  -102
  -122
  -144
  -168
  -195
  -223
  -254
  -287
  -321
  -358
  -396
  -436
  -478
  -522
  -568
  -616
  -665
  -716
  -770
  -825
  -883
  -943
  -1,006
  -1,071
  -1,138
  -1,208
New CAPEX, $m
  -114
  -133
  -153
  -174
  -195
  -216
  -237
  -257
  -278
  -297
  -317
  -335
  -354
  -372
  -390
  -408
  -425
  -443
  -462
  -480
  -499
  -519
  -539
  -560
  -582
  -605
  -630
  -655
  -682
  -710
Cash from investing activities, $m
  -157
  -187
  -221
  -258
  -297
  -338
  -381
  -425
  -473
  -520
  -571
  -622
  -675
  -730
  -786
  -844
  -903
  -965
  -1,030
  -1,096
  -1,164
  -1,235
  -1,309
  -1,385
  -1,465
  -1,548
  -1,636
  -1,726
  -1,820
  -1,918
Free cash flow, $m
  -14
  3
  24
  50
  81
  118
  160
  208
  262
  321
  385
  455
  530
  610
  695
  785
  879
  978
  1,081
  1,189
  1,302
  1,419
  1,540
  1,667
  1,798
  1,934
  2,076
  2,223
  2,376
  2,535
Issuance/(repayment) of debt, $m
  39
  46
  53
  60
  67
  74
  81
  89
  96
  102
  109
  115
  122
  128
  134
  140
  147
  153
  159
  165
  172
  179
  186
  193
  200
  208
  217
  226
  235
  245
Issuance/(repurchase) of shares, $m
  25
  11
  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  
  64
  57
  53
  60
  67
  74
  81
  89
  96
  102
  109
  115
  122
  128
  134
  140
  147
  153
  159
  165
  172
  179
  186
  193
  200
  208
  217
  226
  235
  245
Total cash flow (excl. dividends), $m
  49
  59
  76
  110
  148
  192
  241
  297
  357
  423
  494
  571
  652
  738
  829
  925
  1,026
  1,131
  1,240
  1,355
  1,473
  1,597
  1,726
  1,859
  1,998
  2,143
  2,293
  2,449
  2,611
  2,780
Retained Cash Flow (-), $m
  -113
  -132
  -152
  -173
  -194
  -215
  -236
  -256
  -276
  -296
  -315
  -334
  -352
  -370
  -388
  -406
  -424
  -441
  -459
  -478
  -497
  -516
  -536
  -557
  -579
  -602
  -627
  -652
  -679
  -707
Prev. year cash balance distribution, $m
  153
  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
  90
  -73
  -76
  -63
  -46
  -23
  6
  40
  81
  127
  179
  237
  300
  368
  441
  519
  602
  689
  781
  877
  977
  1,081
  1,189
  1,302
  1,419
  1,540
  1,666
  1,797
  1,932
  2,073
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
  86
  -67
  -66
  -52
  -36
  -17
  4
  25
  46
  67
  85
  101
  114
  124
  130
  132
  131
  127
  120
  111
  101
  90
  78
  66
  55
  45
  36
  28
  21
  16
Current shareholders' claim on cash, %
  92.4
  89.9
  89.9
  89.9
  89.9
  89.9
  89.9
  89.9
  89.9
  89.9
  89.9
  89.9
  89.9
  89.9
  89.9
  89.9
  89.9
  89.9
  89.9
  89.9
  89.9
  89.9
  89.9
  89.9
  89.9
  89.9
  89.9
  89.9
  89.9
  89.9

Fortuna Silver Mines Inc. is a Canada-based mining company engaged in silver mining and related activities in Latin America, including exploration, extraction and processing. The Company operates the Caylloma silver, lead, and zinc mine (Caylloma) in southern Peru and the San Jose silver and gold mine (San Jose) in southern Mexico. The Company's segments include Corporate, Bateas and Cuzcatlan. The Company owns interest in the Caylloma mine and related mining concessions located in southern Peru. The Caylloma property is located in the Caylloma Mining District, approximately 220 kilometers north-northwest of Arequipa, Peru. The Company produces approximately 1.7 million ounces of silver and over 1,160 ounces of gold at Caylloma. The Company's San Jose property, which covers a silver gold bearing epithermal vein system is located in the state of Oaxaca in southern Mexico. The Company produces approximately 4.9 million ounces of silver and over 38,530 ounces of gold at San Jose.

FINANCIAL RATIOS  of  Fortuna Silver Mines Inc. (FSM)

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%

FSM stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the FSM stock intrinsic value calculation we used $268 million for the last fiscal year's total revenue generated by Fortuna Silver Mines Inc.. The default revenue input number comes from 0001 income statement of Fortuna Silver Mines Inc.. 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 FSM stock valuation model: a) initial revenue growth rate of 27.5% 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 FSM is calculated based on our internal credit rating of Fortuna Silver Mines Inc., 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 Fortuna Silver Mines Inc..
    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 FSM stock the variable cost ratio is equal to 41.8%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $75 million in the base year in the intrinsic value calculation for FSM 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 Fortuna Silver Mines Inc..

Corporate tax rate of 27% is the nominal tax rate for Fortuna Silver Mines Inc.. 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 FSM 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 FSM are equal to 153.9%.

Life of production assets of 9.7 years is the average useful life of capital assets used in Fortuna Silver Mines Inc. 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 FSM is equal to -0.2%. 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 - $563.584 million for Fortuna Silver Mines Inc. - 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 159.939 million for Fortuna Silver Mines Inc. 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 Fortuna Silver Mines Inc. at the current share price and the inputted number of shares is $0.4 billion.

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