Goldcorp Inc Valuation – July 2018 $GG

Company Profile (excerpt from Reuters): Goldcorp Inc. (Goldcorp), incorporated on December 1, 2006, is a gold producer engaged in the operation, exploration, development and acquisition of precious metal properties in Canada, the United States, Mexico, and Central and South America. The Company’s segments include Red Lake Gold Mines Ontario Partnership (Red Lake), Goldcorp Canada Ltd./Goldcorp Inc. (Porcupine), Goldcorp Canada Ltd./Goldcorp Inc. (Musselwhite), Les Mines Opinaca Ltee (Eleonore), Kaminak Gold Corporation (Kaminak), Minera Penasquito S.A. de C.V. and Camino Rojo S.A. de C.V. (Penasquito), Oroplata S.A. (Cerro Negro), Minera Alumbrera Limited (Alumbrera), Pueblo Viejo Dominicana Corporation (Pueblo Viejo) and NuevaUnion SpA (NuevaUnion). The Company’s principal producing mining properties consist of the Eleonore, Musselwhite, Porcupine and Red Lake mines in Canada; the Penasquito mine in Mexico; the Cerro Negro mine in Argentina, and the Pueblo Viejo mine in the Dominican Republic. The Company’s principal product is gold dore with the refined gold bullion sold primarily in the London spot market.


Downloadable PDF version of this valuation:

ModernGraham Valuation of GG – July 2018

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $11,764,710,000 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.92 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -76.25% Fail
6. Moderate PEmg Ratio PEmg < 20 -26.85 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 0.84 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.92 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -21.65 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass


Stage 2: Determination of Intrinsic Value

EPSmg -$0.51
MG Growth Estimate 6.64%
MG Value $0.00
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth -$7.40
MG Value based on 0% Growth -$4.34
Market Implied Growth Rate -17.67%
Current Price $13.71
% of Intrinsic Value N/A

Goldcorp Inc. (USA) does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability or growth over the last ten years, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, and the lack of earnings stability over the last five years. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $-0.92 in 2014 to an estimated $-0.51 for 2018. This level of negative earnings does not support a positive valuation.As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Goldcorp Inc. (USA) revealed the company was trading above its Graham Number of $10.33. The company pays a dividend of $0.08 per share, for a yield of 0.6% Its PEmg (price over earnings per share – ModernGraham) was -26.85, which was below the industry average of 46.07, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-7.25.

Goldcorp Inc. (USA) scores quite poorly in the ModernGraham grading system, with an overall grade of D.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$7.25
Graham Number $10.33
PEmg -26.85
Current Ratio 0.92
PB Ratio 0.84
Current Dividend $0.08
Dividend Yield 0.58%
Number of Consecutive Years of Dividend Growth 0

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Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2018
Total Current Assets $1,071,000,000
Total Current Liabilities $1,165,000,000
Long-Term Debt $2,035,000,000
Total Assets $21,615,000,000
Intangible Assets $0
Total Liabilities $7,396,000,000
Shares Outstanding (Diluted Average) 872,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $0.29
Dec2017 $0.76
Dec2016 $0.19
Dec2015 -$5.03
Dec2014 -$2.66
Dec2013 -$3.34
Dec2012 $1.95
Dec2011 $2.18
Dec2010 $2.71
Dec2009 $0.33
Dec2008 $2.06
Dec2007 $0.65
Dec2006 $0.93
Dec2005 $0.83
Dec2004 $0.27
Dec2003 $0.53
Dec2002 $0.37
Dec2001 $0.31
Dec2000 -$0.12
Dec1999 $0.08
Dec1998 -$0.02

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate -$0.51
Dec2017 -$1.28
Dec2016 -$2.13
Dec2015 -$2.65
Dec2014 -$0.92
Dec2013 $0.23
Dec2012 $1.95
Dec2011 $1.83
Dec2010 $1.55
Dec2009 $0.97
Dec2008 $1.17
Dec2007 $0.70
Dec2006 $0.68
Dec2005 $0.52
Dec2004 $0.34
Dec2003 $0.33
Dec2002 $0.19

Recommended Reading:

Other ModernGraham posts about the company

Goldcorp Inc Valuation – August 2016 $GG
Goldcorp Inc. Analysis – Initial Coverage $GG

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The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

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