Intrinsic value of Gold Fields Limited - GFI

Previous Close

$5.27

  Intrinsic Value

$0.97

stock screener

  Rating & Target

str. sell

-82%

Previous close

$5.27

 
Intrinsic value

$0.97

 
Up/down potential

-82%

 
Rating

str. sell

We calculate the intrinsic value of GFI 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 4.4

 

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, %
  3.60
  3.74
  3.87
  3.98
  4.08
  4.17
  4.26
  4.33
  4.40
  4.46
  4.51
  4.56
  4.60
  4.64
  4.68
  4.71
  4.74
  4.77
  4.79
  4.81
  4.83
  4.85
  4.86
  4.88
  4.89
  4.90
  4.91
  4.92
  4.93
  4.93
Revenue, $m
  2,861
  2,968
  3,083
  3,206
  3,337
  3,476
  3,624
  3,781
  3,947
  4,123
  4,309
  4,506
  4,713
  4,932
  5,163
  5,406
  5,662
  5,932
  6,216
  6,515
  6,830
  7,161
  7,509
  7,875
  8,260
  8,665
  9,091
  9,538
  10,008
  10,501
Variable operating expenses, $m
  2,329
  2,416
  2,509
  2,608
  2,715
  2,827
  2,947
  3,075
  3,210
  3,352
  3,496
  3,655
  3,823
  4,001
  4,188
  4,385
  4,593
  4,812
  5,043
  5,285
  5,541
  5,809
  6,092
  6,389
  6,701
  7,029
  7,374
  7,737
  8,118
  8,519
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
  2,329
  2,416
  2,509
  2,608
  2,715
  2,827
  2,947
  3,075
  3,210
  3,352
  3,496
  3,655
  3,823
  4,001
  4,188
  4,385
  4,593
  4,812
  5,043
  5,285
  5,541
  5,809
  6,092
  6,389
  6,701
  7,029
  7,374
  7,737
  8,118
  8,519
Operating income, $m
  533
  553
  574
  598
  622
  649
  676
  706
  737
  771
  814
  851
  890
  931
  975
  1,021
  1,069
  1,120
  1,174
  1,230
  1,289
  1,352
  1,418
  1,487
  1,559
  1,636
  1,716
  1,801
  1,889
  1,983
EBITDA, $m
  1,537
  1,594
  1,656
  1,722
  1,792
  1,867
  1,946
  2,030
  2,120
  2,214
  2,314
  2,419
  2,531
  2,648
  2,772
  2,903
  3,041
  3,186
  3,338
  3,499
  3,668
  3,845
  4,032
  4,229
  4,436
  4,653
  4,882
  5,122
  5,374
  5,639
Interest expense (income), $m
  82
  96
  100
  104
  108
  112
  117
  122
  128
  133
  139
  146
  153
  160
  167
  175
  184
  192
  202
  212
  222
  233
  244
  256
  269
  282
  296
  311
  326
  343
  360
Earnings before tax, $m
  436
  453
  471
  490
  510
  531
  554
  578
  604
  631
  668
  698
  730
  764
  799
  837
  877
  918
  962
  1,008
  1,057
  1,108
  1,161
  1,218
  1,277
  1,340
  1,405
  1,474
  1,547
  1,623
Tax expense, $m
  118
  122
  127
  132
  138
  143
  150
  156
  163
  170
  180
  188
  197
  206
  216
  226
  237
  248
  260
  272
  285
  299
  314
  329
  345
  362
  379
  398
  418
  438
Net income, $m
  319
  330
  343
  357
  372
  388
  405
  422
  441
  461
  487
  510
  533
  558
  584
  611
  640
  670
  702
  736
  771
  809
  848
  889
  932
  978
  1,026
  1,076
  1,129
  1,185

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
  5,319
  5,518
  5,731
  5,959
  6,202
  6,461
  6,736
  7,028
  7,337
  7,664
  8,009
  8,375
  8,760
  9,167
  9,596
  10,048
  10,525
  11,026
  11,555
  12,110
  12,695
  13,311
  13,958
  14,638
  15,354
  16,106
  16,897
  17,728
  18,602
  19,519
Adjusted assets (=assets-cash), $m
  5,319
  5,518
  5,731
  5,959
  6,202
  6,461
  6,736
  7,028
  7,337
  7,664
  8,009
  8,375
  8,760
  9,167
  9,596
  10,048
  10,525
  11,026
  11,555
  12,110
  12,695
  13,311
  13,958
  14,638
  15,354
  16,106
  16,897
  17,728
  18,602
  19,519
Revenue / Adjusted assets
  0.538
  0.538
  0.538
  0.538
  0.538
  0.538
  0.538
  0.538
  0.538
  0.538
  0.538
  0.538
  0.538
  0.538
  0.538
  0.538
  0.538
  0.538
  0.538
  0.538
  0.538
  0.538
  0.538
  0.538
  0.538
  0.538
  0.538
  0.538
  0.538
  0.538
Average production assets, $m
  4,982
  5,168
  5,368
  5,581
  5,809
  6,052
  6,309
  6,582
  6,872
  7,178
  7,502
  7,844
  8,205
  8,587
  8,988
  9,412
  9,858
  10,328
  10,823
  11,343
  11,891
  12,468
  13,074
  13,711
  14,381
  15,086
  15,827
  16,605
  17,423
  18,283
Working capital, $m
  1,133
  1,176
  1,221
  1,270
  1,321
  1,376
  1,435
  1,497
  1,563
  1,633
  1,706
  1,784
  1,866
  1,953
  2,044
  2,141
  2,242
  2,349
  2,462
  2,580
  2,705
  2,836
  2,974
  3,119
  3,271
  3,431
  3,600
  3,777
  3,963
  4,159
Total debt, $m
  1,851
  1,923
  2,001
  2,083
  2,171
  2,265
  2,364
  2,470
  2,582
  2,700
  2,825
  2,958
  3,097
  3,245
  3,400
  3,564
  3,736
  3,918
  4,109
  4,310
  4,522
  4,744
  4,979
  5,225
  5,484
  5,756
  6,043
  6,344
  6,660
  6,992
Total liabilities, $m
  1,925
  1,997
  2,075
  2,157
  2,245
  2,339
  2,438
  2,544
  2,656
  2,774
  2,899
  3,032
  3,171
  3,319
  3,474
  3,638
  3,810
  3,992
  4,183
  4,384
  4,596
  4,818
  5,053
  5,299
  5,558
  5,830
  6,117
  6,418
  6,734
  7,066
Total equity, $m
  3,393
  3,520
  3,656
  3,802
  3,957
  4,122
  4,298
  4,484
  4,681
  4,889
  5,110
  5,343
  5,589
  5,849
  6,122
  6,411
  6,715
  7,035
  7,372
  7,726
  8,100
  8,492
  8,905
  9,339
  9,796
  10,276
  10,780
  11,311
  11,868
  12,453
Total liabilities and equity, $m
  5,318
  5,517
  5,731
  5,959
  6,202
  6,461
  6,736
  7,028
  7,337
  7,663
  8,009
  8,375
  8,760
  9,168
  9,596
  10,049
  10,525
  11,027
  11,555
  12,110
  12,696
  13,310
  13,958
  14,638
  15,354
  16,106
  16,897
  17,729
  18,602
  19,519
Debt-to-equity ratio
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.560
  0.560
  0.560
  0.560
  0.560
  0.560
  0.560
  0.560
  0.560
  0.560
  0.560
  0.560
  0.560
  0.560
  0.560
  0.560
Adjusted equity ratio
  0.638
  0.638
  0.638
  0.638
  0.638
  0.638
  0.638
  0.638
  0.638
  0.638
  0.638
  0.638
  0.638
  0.638
  0.638
  0.638
  0.638
  0.638
  0.638
  0.638
  0.638
  0.638
  0.638
  0.638
  0.638
  0.638
  0.638
  0.638
  0.638
  0.638

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  319
  330
  343
  357
  372
  388
  405
  422
  441
  461
  487
  510
  533
  558
  584
  611
  640
  670
  702
  736
  771
  809
  848
  889
  932
  978
  1,026
  1,076
  1,129
  1,185
Depreciation, amort., depletion, $m
  1,004
  1,041
  1,081
  1,124
  1,170
  1,218
  1,270
  1,324
  1,382
  1,443
  1,500
  1,569
  1,641
  1,717
  1,798
  1,882
  1,972
  2,066
  2,165
  2,269
  2,378
  2,494
  2,615
  2,742
  2,876
  3,017
  3,165
  3,321
  3,485
  3,657
Funds from operations, $m
  1,323
  1,372
  1,425
  1,481
  1,542
  1,606
  1,674
  1,746
  1,823
  1,904
  1,988
  2,078
  2,174
  2,275
  2,381
  2,493
  2,611
  2,736
  2,867
  3,005
  3,150
  3,302
  3,463
  3,631
  3,809
  3,995
  4,191
  4,397
  4,614
  4,841
Change in working capital, $m
  39
  42
  45
  49
  52
  55
  59
  62
  66
  70
  74
  78
  82
  87
  91
  96
  101
  107
  113
  118
  125
  131
  138
  145
  152
  160
  168
  177
  186
  196
Cash from operations, $m
  1,283
  1,329
  1,379
  1,433
  1,490
  1,551
  1,616
  1,684
  1,757
  1,835
  1,914
  2,001
  2,092
  2,188
  2,290
  2,397
  2,510
  2,629
  2,754
  2,886
  3,025
  3,171
  3,325
  3,486
  3,656
  3,835
  4,023
  4,220
  4,428
  4,646
Maintenance CAPEX, $m
  -961
  -996
  -1,034
  -1,074
  -1,116
  -1,162
  -1,210
  -1,262
  -1,316
  -1,374
  -1,436
  -1,500
  -1,569
  -1,641
  -1,717
  -1,798
  -1,882
  -1,972
  -2,066
  -2,165
  -2,269
  -2,378
  -2,494
  -2,615
  -2,742
  -2,876
  -3,017
  -3,165
  -3,321
  -3,485
New CAPEX, $m
  -174
  -186
  -200
  -214
  -228
  -242
  -258
  -273
  -289
  -306
  -324
  -342
  -361
  -381
  -402
  -424
  -446
  -470
  -495
  -521
  -548
  -576
  -606
  -637
  -670
  -705
  -741
  -778
  -818
  -860
Cash from investing activities, $m
  -1,135
  -1,182
  -1,234
  -1,288
  -1,344
  -1,404
  -1,468
  -1,535
  -1,605
  -1,680
  -1,760
  -1,842
  -1,930
  -2,022
  -2,119
  -2,222
  -2,328
  -2,442
  -2,561
  -2,686
  -2,817
  -2,954
  -3,100
  -3,252
  -3,412
  -3,581
  -3,758
  -3,943
  -4,139
  -4,345
Free cash flow, $m
  147
  147
  146
  146
  146
  146
  148
  149
  151
  154
  155
  158
  162
  166
  171
  176
  181
  187
  194
  201
  208
  216
  225
  234
  244
  254
  265
  276
  289
  301
Issuance/(repayment) of debt, $m
  70
  72
  77
  83
  88
  94
  100
  106
  112
  118
  125
  132
  140
  147
  155
  164
  172
  182
  191
  201
  212
  223
  234
  246
  259
  272
  286
  301
  316
  332
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  
  70
  72
  77
  83
  88
  94
  100
  106
  112
  118
  125
  132
  140
  147
  155
  164
  172
  182
  191
  201
  212
  223
  234
  246
  259
  272
  286
  301
  316
  332
Total cash flow (excl. dividends), $m
  217
  219
  223
  228
  234
  240
  247
  255
  263
  272
  280
  290
  301
  313
  326
  340
  354
  369
  385
  402
  420
  439
  459
  480
  503
  526
  551
  577
  605
  634
Retained Cash Flow (-), $m
  -117
  -127
  -136
  -145
  -155
  -165
  -175
  -186
  -197
  -209
  -221
  -233
  -246
  -260
  -274
  -288
  -304
  -320
  -337
  -355
  -373
  -393
  -413
  -434
  -457
  -480
  -504
  -530
  -557
  -586
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
  100
  92
  87
  83
  79
  75
  72
  69
  66
  64
  59
  57
  55
  54
  52
  51
  50
  49
  48
  48
  47
  47
  46
  46
  46
  46
  47
  47
  48
  48
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
  96
  84
  76
  68
  61
  54
  48
  43
  38
  33
  28
  24
  21
  18
  15
  13
  11
  9
  7
  6
  5
  4
  3
  2
  2
  1
  1
  1
  1
  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

Gold Fields Limited (Gold Fields) is a gold mining company. The Company is a producer of gold and a holder of gold reserves. The Company is involved in underground and surface gold and copper mining and related activities, including exploration, development, extraction, processing and smelting. It has approximately eight producing mines located in South Africa, Ghana, Australia and Peru. It operates through four segments: South Africa, Ghana, Australia and Peru. Its South African operation is South Deep. Gold Fields also owns the St. Ives mine, the Agnew mine and the Yilgarn South Assets in Australia, and has an interest in each of the Tarkwa gold mine and the Damang gold mine in Ghana. Gold Fields also owns an economic interest in the Cerro Corona mine. In Peru, Gold Fields also produces copper. In addition, Gold Fields has gold and other precious metal exploration activities and interests in Africa, Eurasia, Australasia and the Americas.

FINANCIAL RATIOS  of  Gold Fields Limited (GFI)

Valuation Ratios
P/E Ratio 26.5
Price to Sales 1.6
Price to Book 1.4
Price to Tangible Book
Price to Cash Flow 4.7
Price to Free Cash Flow 16.1
Growth Rates
Sales Growth Rate 8.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 2.5%
Cap. Spend. - 3 Yr. Gr. Rate -0.9%
Financial Strength
Quick Ratio 3
Current Ratio 0
LT Debt to Equity 49.1%
Total Debt to Equity 55.2%
Interest Coverage 5
Management Effectiveness
Return On Assets 3.3%
Ret/ On Assets - 3 Yr. Avg. -22.4%
Return On Total Capital 3.5%
Ret/ On T. Cap. - 3 Yr. Avg. -0.4%
Return On Equity 5.7%
Return On Equity - 3 Yr. Avg. -0.6%
Asset Turnover 0.5
Profitability Ratios
Gross Margin 73.9%
Gross Margin - 3 Yr. Avg. 70.5%
EBITDA Margin 41%
EBITDA Margin - 3 Yr. Avg. 33.3%
Operating Margin 21.6%
Oper. Margin - 3 Yr. Avg. 15.9%
Pre-Tax Margin 13.3%
Pre-Tax Margin - 3 Yr. Avg. 6.1%
Net Profit Margin 5.9%
Net Profit Margin - 3 Yr. Avg. -1%
Effective Tax Rate 52.5%
Eff/ Tax Rate - 3 Yr. Avg. 1699.4%
Payout Ratio 0%

GFI stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the GFI stock intrinsic value calculation we used $2762 million for the last fiscal year's total revenue generated by Gold Fields Limited. The default revenue input number comes from 0001 income statement of Gold Fields 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 GFI stock valuation model: a) initial revenue growth rate of 3.6% 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 GFI is calculated based on our internal credit rating of Gold Fields 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 Gold Fields 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 GFI stock the variable cost ratio is equal to 81.4%.

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 GFI 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 Gold Fields Limited.

Corporate tax rate of 27% is the nominal tax rate for Gold Fields 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 GFI 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 GFI are equal to 174.1%.

Life of production assets of 0 years is the average useful life of capital assets used in Gold Fields 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 GFI is equal to 39.6%. 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 - $3275.8 million for Gold Fields 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 829.082 million for Gold Fields 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 Gold Fields Limited at the current share price and the inputted number of shares is $4.4 billion.

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