Intrinsic value of Iamgold Corporation - IAG

Previous Close

$3.31

  Intrinsic Value

$10.45

stock screener

  Rating & Target

str. buy

+216%

Previous close

$3.31

 
Intrinsic value

$10.45

 
Up/down potential

+216%

 
Rating

str. buy

We calculate the intrinsic value of IAG 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 1.5

 

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
  1,133
  1,159
  1,189
  1,223
  1,260
  1,300
  1,345
  1,392
  1,444
  1,500
  1,559
  1,622
  1,689
  1,761
  1,837
  1,918
  2,003
  2,093
  2,188
  2,289
  2,395
  2,507
  2,624
  2,749
  2,880
  3,017
  3,162
  3,315
  3,476
  3,644
Variable operating expenses, $m
  514
  526
  540
  555
  572
  590
  610
  632
  656
  681
  708
  736
  767
  800
  834
  871
  909
  950
  993
  1,039
  1,087
  1,138
  1,192
  1,248
  1,307
  1,370
  1,436
  1,505
  1,578
  1,655
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
  514
  526
  540
  555
  572
  590
  610
  632
  656
  681
  708
  736
  767
  800
  834
  871
  909
  950
  993
  1,039
  1,087
  1,138
  1,192
  1,248
  1,307
  1,370
  1,436
  1,505
  1,578
  1,655
Operating income, $m
  619
  633
  649
  667
  688
  710
  734
  760
  788
  819
  851
  886
  922
  962
  1,003
  1,047
  1,093
  1,143
  1,195
  1,250
  1,307
  1,369
  1,433
  1,501
  1,572
  1,647
  1,727
  1,810
  1,898
  1,990
EBITDA, $m
  890
  911
  934
  960
  989
  1,021
  1,056
  1,094
  1,134
  1,178
  1,225
  1,274
  1,327
  1,383
  1,443
  1,506
  1,573
  1,644
  1,719
  1,798
  1,881
  1,969
  2,062
  2,159
  2,262
  2,370
  2,484
  2,604
  2,730
  2,863
Interest expense (income), $m
  25
  22
  23
  24
  26
  28
  30
  33
  35
  38
  41
  45
  48
  52
  56
  60
  65
  70
  75
  80
  86
  92
  98
  105
  112
  119
  127
  135
  144
  153
  163
Earnings before tax, $m
  597
  610
  625
  641
  660
  680
  701
  725
  750
  777
  806
  837
  870
  905
  943
  982
  1,024
  1,068
  1,115
  1,164
  1,216
  1,270
  1,328
  1,389
  1,453
  1,520
  1,591
  1,666
  1,745
  1,827
Tax expense, $m
  161
  165
  169
  173
  178
  183
  189
  196
  203
  210
  218
  226
  235
  244
  255
  265
  276
  288
  301
  314
  328
  343
  359
  375
  392
  411
  430
  450
  471
  493
Net income, $m
  436
  445
  456
  468
  481
  496
  512
  529
  548
  567
  589
  611
  635
  661
  688
  717
  747
  780
  814
  850
  887
  927
  970
  1,014
  1,061
  1,110
  1,162
  1,216
  1,274
  1,334

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
  3,519
  3,600
  3,693
  3,797
  3,912
  4,038
  4,176
  4,324
  4,485
  4,657
  4,841
  5,038
  5,247
  5,469
  5,705
  5,955
  6,220
  6,500
  6,795
  7,107
  7,437
  7,784
  8,151
  8,536
  8,943
  9,371
  9,821
  10,295
  10,794
  11,318
Adjusted assets (=assets-cash), $m
  3,519
  3,600
  3,693
  3,797
  3,912
  4,038
  4,176
  4,324
  4,485
  4,657
  4,841
  5,038
  5,247
  5,469
  5,705
  5,955
  6,220
  6,500
  6,795
  7,107
  7,437
  7,784
  8,151
  8,536
  8,943
  9,371
  9,821
  10,295
  10,794
  11,318
Revenue / Adjusted assets
  0.322
  0.322
  0.322
  0.322
  0.322
  0.322
  0.322
  0.322
  0.322
  0.322
  0.322
  0.322
  0.322
  0.322
  0.322
  0.322
  0.322
  0.322
  0.322
  0.322
  0.322
  0.322
  0.322
  0.322
  0.322
  0.322
  0.322
  0.322
  0.322
  0.322
Average production assets, $m
  2,498
  2,555
  2,621
  2,694
  2,776
  2,866
  2,963
  3,069
  3,183
  3,305
  3,436
  3,575
  3,724
  3,881
  4,049
  4,226
  4,414
  4,613
  4,822
  5,044
  5,278
  5,524
  5,784
  6,058
  6,347
  6,650
  6,970
  7,306
  7,660
  8,032
Working capital, $m
  128
  131
  134
  138
  142
  147
  152
  157
  163
  169
  176
  183
  191
  199
  208
  217
  226
  236
  247
  259
  271
  283
  297
  311
  325
  341
  357
  375
  393
  412
Total debt, $m
  423
  452
  485
  522
  563
  608
  657
  710
  767
  828
  894
  963
  1,038
  1,117
  1,201
  1,290
  1,384
  1,484
  1,589
  1,700
  1,818
  1,941
  2,072
  2,209
  2,354
  2,506
  2,666
  2,835
  3,013
  3,199
Total liabilities, $m
  1,253
  1,282
  1,315
  1,352
  1,393
  1,438
  1,487
  1,540
  1,597
  1,658
  1,723
  1,793
  1,868
  1,947
  2,031
  2,120
  2,214
  2,314
  2,419
  2,530
  2,648
  2,771
  2,902
  3,039
  3,184
  3,336
  3,496
  3,665
  3,843
  4,029
Total equity, $m
  2,266
  2,319
  2,378
  2,445
  2,519
  2,601
  2,689
  2,785
  2,888
  2,999
  3,118
  3,244
  3,379
  3,522
  3,674
  3,835
  4,005
  4,186
  4,376
  4,577
  4,789
  5,013
  5,249
  5,497
  5,759
  6,035
  6,325
  6,630
  6,951
  7,289
Total liabilities and equity, $m
  3,519
  3,601
  3,693
  3,797
  3,912
  4,039
  4,176
  4,325
  4,485
  4,657
  4,841
  5,037
  5,247
  5,469
  5,705
  5,955
  6,219
  6,500
  6,795
  7,107
  7,437
  7,784
  8,151
  8,536
  8,943
  9,371
  9,821
  10,295
  10,794
  11,318
Debt-to-equity ratio
  0.190
  0.190
  0.200
  0.210
  0.220
  0.230
  0.240
  0.250
  0.270
  0.280
  0.290
  0.300
  0.310
  0.320
  0.330
  0.340
  0.350
  0.350
  0.360
  0.370
  0.380
  0.390
  0.390
  0.400
  0.410
  0.420
  0.420
  0.430
  0.430
  0.440
Adjusted equity ratio
  0.644
  0.644
  0.644
  0.644
  0.644
  0.644
  0.644
  0.644
  0.644
  0.644
  0.644
  0.644
  0.644
  0.644
  0.644
  0.644
  0.644
  0.644
  0.644
  0.644
  0.644
  0.644
  0.644
  0.644
  0.644
  0.644
  0.644
  0.644
  0.644
  0.644

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  436
  445
  456
  468
  481
  496
  512
  529
  548
  567
  589
  611
  635
  661
  688
  717
  747
  780
  814
  850
  887
  927
  970
  1,014
  1,061
  1,110
  1,162
  1,216
  1,274
  1,334
Depreciation, amort., depletion, $m
  271
  278
  285
  293
  302
  311
  322
  334
  346
  359
  373
  389
  405
  422
  440
  459
  480
  501
  524
  548
  574
  600
  629
  658
  690
  723
  758
  794
  833
  873
Funds from operations, $m
  707
  723
  741
  761
  783
  808
  834
  863
  894
  927
  962
  1,000
  1,040
  1,083
  1,128
  1,176
  1,227
  1,281
  1,338
  1,398
  1,461
  1,528
  1,598
  1,672
  1,751
  1,833
  1,919
  2,010
  2,106
  2,207
Change in working capital, $m
  3
  3
  3
  4
  4
  5
  5
  5
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
  16
  16
  17
  18
  19
Cash from operations, $m
  705
  720
  738
  757
  779
  803
  829
  857
  888
  920
  955
  993
  1,033
  1,075
  1,120
  1,167
  1,218
  1,271
  1,327
  1,386
  1,449
  1,515
  1,585
  1,658
  1,736
  1,817
  1,903
  1,993
  2,088
  2,188
Maintenance CAPEX, $m
  -266
  -271
  -278
  -285
  -293
  -302
  -311
  -322
  -334
  -346
  -359
  -373
  -389
  -405
  -422
  -440
  -459
  -480
  -501
  -524
  -548
  -574
  -600
  -629
  -658
  -690
  -723
  -758
  -794
  -833
New CAPEX, $m
  -49
  -57
  -66
  -74
  -82
  -90
  -98
  -106
  -114
  -122
  -131
  -139
  -148
  -158
  -167
  -177
  -188
  -199
  -210
  -222
  -234
  -247
  -260
  -274
  -288
  -304
  -320
  -336
  -354
  -372
Cash from investing activities, $m
  -315
  -328
  -344
  -359
  -375
  -392
  -409
  -428
  -448
  -468
  -490
  -512
  -537
  -563
  -589
  -617
  -647
  -679
  -711
  -746
  -782
  -821
  -860
  -903
  -946
  -994
  -1,043
  -1,094
  -1,148
  -1,205
Free cash flow, $m
  390
  391
  394
  399
  404
  412
  420
  430
  440
  452
  466
  480
  495
  512
  530
  550
  570
  592
  616
  641
  667
  695
  725
  756
  789
  824
  860
  899
  940
  983
Issuance/(repayment) of debt, $m
  24
  29
  33
  37
  41
  45
  49
  53
  57
  61
  66
  70
  74
  79
  84
  89
  94
  100
  105
  111
  117
  124
  130
  137
  145
  152
  160
  169
  177
  187
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  
  24
  29
  33
  37
  41
  45
  49
  53
  57
  61
  66
  70
  74
  79
  84
  89
  94
  100
  105
  111
  117
  124
  130
  137
  145
  152
  160
  169
  177
  187
Total cash flow (excl. dividends), $m
  415
  420
  427
  436
  445
  457
  469
  483
  497
  514
  531
  550
  570
  591
  614
  639
  665
  692
  721
  752
  784
  819
  855
  893
  933
  976
  1,021
  1,068
  1,117
  1,170
Retained Cash Flow (-), $m
  -41
  -52
  -60
  -67
  -74
  -81
  -89
  -96
  -103
  -111
  -119
  -127
  -135
  -143
  -152
  -161
  -170
  -180
  -190
  -201
  -212
  -224
  -236
  -248
  -262
  -276
  -290
  -305
  -321
  -338
Prev. year cash balance distribution, $m
  507
  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
  881
  368
  368
  369
  371
  375
  380
  387
  394
  403
  412
  423
  435
  448
  462
  478
  494
  512
  531
  551
  572
  595
  619
  645
  672
  700
  731
  763
  796
  832
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
  845
  337
  320
  304
  288
  272
  257
  242
  226
  211
  196
  181
  165
  150
  136
  121
  108
  94
  82
  70
  59
  49
  41
  33
  26
  20
  16
  12
  9
  6
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

IAMGOLD Corporation (IAMGOLD) is engaged primarily in the exploration for, and the development and production of, mineral resource properties throughout the world. Through its holdings, IAMGOLD has interests in various operations, exploration and development properties. IAMGOLD is a mid-tier mining company with approximately four operating gold mines on over three continents. The Company's gold mine segment is divided into geographic segments, such as Burkina Faso - Essakane mine; Suriname-Rosebel mine; Canada-Doyon division, which includes the Westwood mine and the Doyon mine, and Joint ventures (Mali)-Sadiola mine (41%) and Yatela mine (40%). The Company's non-gold segments are divided into Exploration and evaluation, and Corporate, which includes royalty interests located in Canada and investments in associates and joint ventures. In Canada, the Company owns the Westwood mine in Quebec and the Cote Gold project, a development project located in Ontario.

FINANCIAL RATIOS  of  Iamgold Corporation (IAG)

Valuation Ratios
P/E Ratio 28.3
Price to Sales 1.5
Price to Book 0.7
Price to Tangible Book
Price to Cash Flow 4.8
Price to Free Cash Flow 37.6
Growth Rates
Sales Growth Rate 7.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 36.3%
Cap. Spend. - 3 Yr. Gr. Rate -15%
Financial Strength
Quick Ratio NaN
Current Ratio 0.5
LT Debt to Equity 21.8%
Total Debt to Equity 21.8%
Interest Coverage 5
Management Effectiveness
Return On Assets 2.1%
Ret/ On Assets - 3 Yr. Avg. -7%
Return On Total Capital 2%
Ret/ On T. Cap. - 3 Yr. Avg. -10%
Return On Equity 2.6%
Return On Equity - 3 Yr. Avg. -12.8%
Asset Turnover 0.3
Profitability Ratios
Gross Margin 10.3%
Gross Margin - 3 Yr. Avg. 5.2%
EBITDA Margin 38.9%
EBITDA Margin - 3 Yr. Avg. -1.1%
Operating Margin 3.6%
Oper. Margin - 3 Yr. Avg. -27.7%
Pre-Tax Margin 9.6%
Pre-Tax Margin - 3 Yr. Avg. -30.1%
Net Profit Margin 5.4%
Net Profit Margin - 3 Yr. Avg. -32.5%
Effective Tax Rate 34.7%
Eff/ Tax Rate - 3 Yr. Avg. -16.2%
Payout Ratio 0%

IAG stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the IAG stock intrinsic value calculation we used $1111 million for the last fiscal year's total revenue generated by Iamgold Corporation. The default revenue input number comes from 0001 income statement of Iamgold Corporation. 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 IAG 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 IAG is calculated based on our internal credit rating of Iamgold Corporation, 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 Iamgold Corporation.
    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 IAG stock the variable cost ratio is equal to 45.4%.

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 IAG 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 Iamgold Corporation.

Corporate tax rate of 27% is the nominal tax rate for Iamgold Corporation. 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 IAG 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 IAG are equal to 220.4%.

Life of production assets of 9.2 years is the average useful life of capital assets used in Iamgold Corporation 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 IAG is equal to 11.3%. 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 - $2732.6 million for Iamgold Corporation - 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 467.787 million for Iamgold Corporation 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 Iamgold Corporation at the current share price and the inputted number of shares is $1.5 billion.

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