Stock Analysis on Net

Newmont Corp. (NYSE:NEM)

Present Value of Free Cash Flow to Equity (FCFE) 

Microsoft Excel

In discounted cash flow (DCF) valuation techniques the value of the stock is estimated based upon present value of some measure of cash flow. Free cash flow to equity (FCFE) is generally described as cash flows available to the equity holder after payments to debt holders and after allowing for expenditures to maintain the company asset base.


Intrinsic Stock Value (Valuation Summary)

Newmont Corp., free cash flow to equity (FCFE) forecast

US$ in millions, except per share data

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Year Value FCFEt or Terminal value (TVt) Calculation Present value at 9.25%
01 FCFE0 21
1 FCFE1 21 = 21 × (1 + 1.12%) 19
2 FCFE2 22 = 21 × (1 + 3.14%) 18
3 FCFE3 23 = 22 × (1 + 5.16%) 18
4 FCFE4 25 = 23 × (1 + 7.17%) 17
5 FCFE5 27 = 25 × (1 + 9.19%) 17
5 Terminal value (TV5) 50,119 = 27 × (1 + 9.19%) ÷ (9.25%9.19%) 32,204
Intrinsic value of Newmont Corp. common stock 32,294
 
Intrinsic value of Newmont Corp. common stock (per share) $28.02
Current share price $33.88

Based on: 10-K (reporting date: 2023-12-31).

Disclaimer!
Valuation is based on standard assumptions. There may exist specific factors relevant to stock value and omitted here. In such a case, the real stock value may differ significantly form the estimated. If you want to use the estimated intrinsic stock value in investment decision making process, do so at your own risk.


Required Rate of Return (r)

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Assumptions
Rate of return on LT Treasury Composite1 RF 4.53%
Expected rate of return on market portfolio2 E(RM) 13.63%
Systematic risk of Newmont Corp. common stock βNEM 0.52
 
Required rate of return on Newmont Corp. common stock3 rNEM 9.25%

1 Unweighted average of bid yields on all outstanding fixed-coupon U.S. Treasury bonds neither due or callable in less than 10 years (risk-free rate of return proxy).

2 See details »

3 rNEM = RF + βNEM [E(RM) – RF]
= 4.53% + 0.52 [13.63%4.53%]
= 9.25%


FCFE Growth Rate (g)

FCFE growth rate (g) implied by PRAT model

Newmont Corp., PRAT model

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Average Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020 Dec 31, 2019
Selected Financial Data (US$ in millions)
Dividends declared 1,418 1,753 1,764 839 895
Net income (loss) attributable to Newmont stockholders (2,494) (429) 1,166 2,829 2,805
Sales 11,812 11,915 12,222 11,497 9,740
Total assets 55,506 38,482 40,564 41,369 39,974
Total Newmont stockholders’ equity 29,027 19,354 22,022 23,008 21,420
Financial Ratios
Retention rate1 -0.51 0.70 0.68
Profit margin2 -21.11% -3.60% 9.54% 24.61% 28.80%
Asset turnover3 0.21 0.31 0.30 0.28 0.24
Financial leverage4 1.91 1.99 1.84 1.80 1.87
Averages
Retention rate 0.29
Profit margin 7.65%
Asset turnover 0.27
Financial leverage 1.88
 
FCFE growth rate (g)5 1.12%

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

2023 Calculations

1 Retention rate = (Net income (loss) attributable to Newmont stockholders – Dividends declared) ÷ Net income (loss) attributable to Newmont stockholders
= (-2,4941,418) ÷ -2,494
=

2 Profit margin = 100 × Net income (loss) attributable to Newmont stockholders ÷ Sales
= 100 × -2,494 ÷ 11,812
= -21.11%

3 Asset turnover = Sales ÷ Total assets
= 11,812 ÷ 55,506
= 0.21

4 Financial leverage = Total assets ÷ Total Newmont stockholders’ equity
= 55,506 ÷ 29,027
= 1.91

5 g = Retention rate × Profit margin × Asset turnover × Financial leverage
= 0.29 × 7.65% × 0.27 × 1.88
= 1.12%


FCFE growth rate (g) implied by single-stage model

g = 100 × (Equity market value0 × r – FCFE0) ÷ (Equity market value0 + FCFE0)
= 100 × (39,048 × 9.25%21) ÷ (39,048 + 21)
= 9.19%

where:
Equity market value0 = current market value of Newmont Corp. common stock (US$ in millions)
FCFE0 = the last year Newmont Corp. free cash flow to equity (US$ in millions)
r = required rate of return on Newmont Corp. common stock


FCFE growth rate (g) forecast

Newmont Corp., H-model

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Year Value gt
1 g1 1.12%
2 g2 3.14%
3 g3 5.16%
4 g4 7.17%
5 and thereafter g5 9.19%

where:
g1 is implied by PRAT model
g5 is implied by single-stage model
g2, g3 and g4 are calculated using linear interpoltion between g1 and g5

Calculations

g2 = g1 + (g5g1) × (2 – 1) ÷ (5 – 1)
= 1.12% + (9.19%1.12%) × (2 – 1) ÷ (5 – 1)
= 3.14%

g3 = g1 + (g5g1) × (3 – 1) ÷ (5 – 1)
= 1.12% + (9.19%1.12%) × (3 – 1) ÷ (5 – 1)
= 5.16%

g4 = g1 + (g5g1) × (4 – 1) ÷ (5 – 1)
= 1.12% + (9.19%1.12%) × (4 – 1) ÷ (5 – 1)
= 7.17%