Kinross Gold Corporation is a Canadian-based gold and silver mining company founded in 1993 and headquartered in Toronto, Ontario, Canada. Kinross currently operates eight active gold mines, and was ranked fifth of the “10 Top Gold-mining Companies” of 2019 by InvestingNews. Kinross Gold Corporation, together with its subsidiaries, engages in the acquisition, exploration, and development of gold properties principally in the United States, the Russian Federation, Brazil, Chile, Ghana, and Mauritania. With the expected rise in inflation, precious and base metals may act as a good hedge in one’s portfolio. This week, I fundamentally analyze Kinross Gold’s stock. I review KGC’s operating segments, look at its key ratios, derive the intrinsic value using Discounted Cash Flow (DCF) analysis, and calculate the expected rate of return from this investment. Since this is a long video, please feel free to use the time stamps in the video if you only wish to watch certain topics.
I review various key ratios such as Revenue, Net Income, Shares outstanding, Dividends, Payout Ratio, Free Cash Flows (FCF), Financial Leverage, Current Ratio, Debt to Equity Ratio, Return on Equity (ROE), Days Sales Outstanding (DSO), Days Inventory, Payable Period, Cash Conversion Cycle, Inventory Turnover, etc.
After taking into account 2019-2020’s average free cash flow of $581 million figure, a 7% growth rate of FCF (growth for the next 10 years), 10% discount rate, 3% long term growth rate (growth from 10 year mark to perpetuity), 1,269 million shares outstanding, and $1,424 million of long term debt, the DCF analysis yields us an intrinsic value of $7.79 per share. If we drop the discount rate from 10% to 9.4%, the intrinsic value comes to $8.71 per share. Using the current stock price of about $8.1 per share, and taking into the shares outstanding and future projects of free cash flows, we get the annual expected rate of return to be 9% if we hold this security through 2060.
Timestamp
0:00 Introduction
0:35 Business Overview
2:35 Key Ratios Analysis
11:29 Discounted Cash Flow Analysis / Intrinsic Value
13:40 Expected Rate of Return Calculation
14:48 Summary / Conclusion
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References:
Kinross Ross’s Website: here
Morningstar Key Ratios Link: here.
Useful Resources here.
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