Intrinsic value of Royal Gold, Inc. - RGLD

Previous Close

$92.56

  Intrinsic Value

$9.50

stock screener

  Rating & Target

str. sell

-90%

Previous close

$92.56

 
Intrinsic value

$9.50

 
Up/down potential

-90%

 
Rating

str. sell

We calculate the intrinsic value of RGLD 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 6.1

 

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, %
  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
  468
  479
  491
  505
  520
  537
  555
  575
  597
  620
  644
  670
  698
  728
  759
  792
  827
  865
  904
  946
  989
  1,036
  1,084
  1,136
  1,190
  1,247
  1,307
  1,370
  1,436
  1,506
Variable operating expenses, $m
  313
  320
  329
  338
  348
  359
  372
  385
  399
  414
  431
  448
  467
  487
  508
  530
  554
  578
  605
  633
  662
  693
  725
  760
  796
  834
  874
  916
  961
  1,007
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
  313
  320
  329
  338
  348
  359
  372
  385
  399
  414
  431
  448
  467
  487
  508
  530
  554
  578
  605
  633
  662
  693
  725
  760
  796
  834
  874
  916
  961
  1,007
Operating income, $m
  155
  159
  163
  167
  172
  178
  184
  190
  197
  205
  213
  222
  231
  241
  251
  262
  274
  286
  299
  313
  327
  343
  359
  376
  394
  413
  432
  453
  475
  498
EBITDA, $m
  155
  159
  163
  167
  172
  178
  184
  190
  197
  205
  213
  222
  231
  241
  251
  262
  274
  286
  299
  313
  327
  343
  359
  376
  394
  413
  432
  453
  475
  498
Interest expense (income), $m
  19
  26
  26
  27
  28
  30
  31
  33
  34
  36
  38
  40
  42
  45
  47
  50
  53
  56
  59
  63
  66
  70
  74
  78
  83
  88
  93
  98
  103
  109
  115
Earnings before tax, $m
  129
  132
  135
  139
  143
  147
  151
  156
  161
  167
  173
  179
  186
  193
  201
  209
  218
  227
  236
  247
  257
  269
  280
  293
  306
  320
  335
  350
  366
  383
Tax expense, $m
  35
  36
  37
  37
  38
  40
  41
  42
  44
  45
  47
  48
  50
  52
  54
  56
  59
  61
  64
  67
  69
  73
  76
  79
  83
  86
  90
  94
  99
  103
Net income, $m
  94
  97
  99
  101
  104
  107
  110
  114
  118
  122
  126
  131
  136
  141
  147
  153
  159
  166
  173
  180
  188
  196
  205
  214
  223
  234
  244
  255
  267
  280

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
  2,691
  2,753
  2,823
  2,903
  2,991
  3,087
  3,192
  3,306
  3,429
  3,560
  3,701
  3,851
  4,011
  4,181
  4,362
  4,553
  4,755
  4,969
  5,195
  5,434
  5,686
  5,952
  6,231
  6,527
  6,837
  7,164
  7,509
  7,871
  8,252
  8,653
Adjusted assets (=assets-cash), $m
  2,691
  2,753
  2,823
  2,903
  2,991
  3,087
  3,192
  3,306
  3,429
  3,560
  3,701
  3,851
  4,011
  4,181
  4,362
  4,553
  4,755
  4,969
  5,195
  5,434
  5,686
  5,952
  6,231
  6,527
  6,837
  7,164
  7,509
  7,871
  8,252
  8,653
Revenue / Adjusted assets
  0.174
  0.174
  0.174
  0.174
  0.174
  0.174
  0.174
  0.174
  0.174
  0.174
  0.174
  0.174
  0.174
  0.174
  0.174
  0.174
  0.174
  0.174
  0.174
  0.174
  0.174
  0.174
  0.174
  0.174
  0.174
  0.174
  0.174
  0.174
  0.174
  0.174
Average production assets, $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
Working capital, $m
  -15
  -15
  -15
  -16
  -16
  -17
  -17
  -18
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -31
  -32
  -34
  -35
  -37
  -39
  -41
  -42
  -45
  -47
Total debt, $m
  360
  374
  389
  407
  426
  447
  470
  495
  522
  551
  582
  615
  650
  687
  726
  768
  813
  859
  909
  961
  1,016
  1,075
  1,136
  1,200
  1,269
  1,340
  1,416
  1,495
  1,578
  1,666
Total liabilities, $m
  589
  603
  618
  636
  655
  676
  699
  724
  751
  780
  811
  843
  878
  916
  955
  997
  1,041
  1,088
  1,138
  1,190
  1,245
  1,303
  1,365
  1,429
  1,497
  1,569
  1,644
  1,724
  1,807
  1,895
Total equity, $m
  2,101
  2,150
  2,205
  2,267
  2,336
  2,411
  2,493
  2,582
  2,678
  2,781
  2,891
  3,008
  3,133
  3,266
  3,407
  3,556
  3,714
  3,881
  4,058
  4,244
  4,441
  4,648
  4,867
  5,097
  5,340
  5,595
  5,864
  6,147
  6,445
  6,758
Total liabilities and equity, $m
  2,690
  2,753
  2,823
  2,903
  2,991
  3,087
  3,192
  3,306
  3,429
  3,561
  3,702
  3,851
  4,011
  4,182
  4,362
  4,553
  4,755
  4,969
  5,196
  5,434
  5,686
  5,951
  6,232
  6,526
  6,837
  7,164
  7,508
  7,871
  8,252
  8,653
Debt-to-equity ratio
  0.170
  0.170
  0.180
  0.180
  0.180
  0.190
  0.190
  0.190
  0.190
  0.200
  0.200
  0.200
  0.210
  0.210
  0.210
  0.220
  0.220
  0.220
  0.220
  0.230
  0.230
  0.230
  0.230
  0.240
  0.240
  0.240
  0.240
  0.240
  0.240
  0.250
Adjusted equity ratio
  0.781
  0.781
  0.781
  0.781
  0.781
  0.781
  0.781
  0.781
  0.781
  0.781
  0.781
  0.781
  0.781
  0.781
  0.781
  0.781
  0.781
  0.781
  0.781
  0.781
  0.781
  0.781
  0.781
  0.781
  0.781
  0.781
  0.781
  0.781
  0.781
  0.781

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  94
  97
  99
  101
  104
  107
  110
  114
  118
  122
  126
  131
  136
  141
  147
  153
  159
  166
  173
  180
  188
  196
  205
  214
  223
  234
  244
  255
  267
  280
Depreciation, amort., depletion, $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
Funds from operations, $m
  94
  97
  99
  101
  104
  107
  110
  114
  118
  122
  126
  131
  136
  141
  147
  153
  159
  166
  173
  180
  188
  196
  205
  214
  223
  234
  244
  255
  267
  280
Change in working capital, $m
  0
  0
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
Cash from operations, $m
  95
  97
  99
  102
  105
  108
  111
  115
  118
  123
  127
  132
  137
  142
  148
  154
  160
  167
  174
  181
  189
  197
  206
  215
  225
  235
  246
  257
  269
  282
Maintenance CAPEX, $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
New CAPEX, $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 investing activities, $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
Free cash flow, $m
  95
  97
  99
  102
  105
  108
  111
  115
  118
  123
  127
  132
  137
  142
  148
  154
  160
  167
  174
  181
  189
  197
  206
  215
  225
  235
  246
  257
  269
  282
Issuance/(repayment) of debt, $m
  9
  14
  15
  17
  19
  21
  23
  25
  27
  29
  31
  33
  35
  37
  40
  42
  44
  47
  50
  52
  55
  58
  61
  65
  68
  72
  75
  79
  83
  88
Issuance/(repurchase) of shares, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  1
  4
  6
  9
  11
  14
  17
  19
  22
  25
  27
  30
  33
Cash from financing (excl. dividends), $m  
  9
  14
  15
  17
  19
  21
  23
  25
  27
  29
  31
  33
  35
  37
  40
  42
  44
  48
  54
  58
  64
  69
  75
  82
  87
  94
  100
  106
  113
  121
Total cash flow (excl. dividends), $m
  104
  110
  115
  119
  124
  129
  134
  139
  145
  151
  158
  165
  172
  179
  187
  196
  204
  215
  227
  240
  253
  267
  282
  297
  312
  329
  346
  364
  383
  403
Retained Cash Flow (-), $m
  -37
  -48
  -55
  -62
  -69
  -75
  -82
  -89
  -96
  -103
  -110
  -117
  -125
  -133
  -141
  -149
  -158
  -167
  -177
  -186
  -197
  -207
  -219
  -230
  -243
  -255
  -269
  -283
  -298
  -313
Prev. year cash balance distribution, $m
  37
  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
  105
  62
  59
  57
  55
  53
  52
  51
  50
  49
  48
  47
  47
  47
  46
  46
  46
  48
  51
  54
  57
  60
  63
  66
  70
  73
  77
  81
  86
  90
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
  101
  57
  52
  47
  43
  39
  35
  32
  28
  25
  23
  20
  18
  16
  14
  12
  10
  9
  8
  7
  6
  5
  4
  3
  3
  2
  2
  1
  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
  99.9
  99.8
  99.7
  99.6
  99.5
  99.4
  99.2
  99.1
  98.9
  98.8
  98.6

Royal Gold, Inc., together with its subsidiaries, is engaged in acquiring and managing precious metal streams, royalties and similar interests. The Company operates through two segments: Acquisition and Management of Stream Interests, and Acquisition and Management of Royalty Interests. Its assets are located in Canada, Chile, Dominican Republic, Mexico, the United States, Africa, Australia and Other. As of June 30, 2016, the Company owned stream interests on four producing properties and three development-stage properties. It has investments in stream interests relating to Pueblo Viejo, Andacollo, Wassa and Prestea, and Rainy River. As of June 30, 2016, the Company owned royalty interests on 34 producing properties, 21 development-stage properties and 131 exploration-stage properties, of which it considered 50 to be evaluation-stage projects.

FINANCIAL RATIOS  of  Royal Gold, Inc. (RGLD)

Valuation Ratios
P/E Ratio 59.1
Price to Sales 13.7
Price to Book 2.7
Price to Tangible Book
Price to Cash Flow 22.7
Price to Free Cash Flow 22.7
Growth Rates
Sales Growth Rate 22.5%
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 0
LT Debt to Equity 25.8%
Total Debt to Equity 25.8%
Interest Coverage 7
Management Effectiveness
Return On Assets 3.8%
Ret/ On Assets - 3 Yr. Avg. 1.9%
Return On Total Capital 3.6%
Ret/ On T. Cap. - 3 Yr. Avg. 0.9%
Return On Equity 4.5%
Return On Equity - 3 Yr. Avg. 1.1%
Asset Turnover 0.1
Profitability Ratios
Gross Margin 79.8%
Gross Margin - 3 Yr. Avg. 81.7%
EBITDA Margin 67.6%
EBITDA Margin - 3 Yr. Avg. 55.1%
Operating Margin 33.1%
Oper. Margin - 3 Yr. Avg. 21.9%
Pre-Tax Margin 27%
Pre-Tax Margin - 3 Yr. Avg. 14.4%
Net Profit Margin 23.1%
Net Profit Margin - 3 Yr. Avg. 6.8%
Effective Tax Rate 22.7%
Eff/ Tax Rate - 3 Yr. Avg. -78.5%
Payout Ratio 59.8%

RGLD stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the RGLD stock intrinsic value calculation we used $459 million for the last fiscal year's total revenue generated by Royal Gold, Inc.. The default revenue input number comes from 0001 income statement of Royal Gold, 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 RGLD 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 RGLD is calculated based on our internal credit rating of Royal Gold, 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 Royal Gold, 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 RGLD stock the variable cost ratio is equal to 66.9%.

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 RGLD 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 7.3% for Royal Gold, Inc..

Corporate tax rate of 27% is the nominal tax rate for Royal Gold, 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 RGLD 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 RGLD are equal to 0%.

Life of production assets of 0 years is the average useful life of capital assets used in Royal Gold, 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 RGLD is equal to -3.1%. 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 - $2102.167 million for Royal Gold, 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 65.527 million for Royal Gold, 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 Royal Gold, Inc. at the current share price and the inputted number of shares is $6.1 billion.

RELATED COMPANIES Price Int.Val. Rating
HL Hecla Mining C 2.23 0.88  str.sell
IAG Iamgold Corpor 3.34 10.81  str.buy

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