What is PVG.TO's Intrinsic value?

Pretium Resources Inc (PVG.TO) Intrinsic Value Analysis

Executive Summary

As of May 22, 2025, Pretium Resources Inc's estimated intrinsic value ranges from $4.08 to $12.59 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Discounted Cash Flow (10Y) $12.59 -34.3%
Discounted Cash Flow (5Y) $4.08 -78.7%
Dividend Discount Model (Multi-Stage) $8.52 -55.5%

Is Pretium Resources Inc (PVG.TO) undervalued or overvalued?

With the current market price at $19.15, the stock appears to be significantly overvalued.

Understanding Intrinsic Value

Intrinsic value represents the "true" worth of a company based on its fundamentals rather than market sentiment. We've employed multiple methodologies to triangulate Pretium Resources Inc's intrinsic value, including:

  1. Discounted Cash Flow (DCF): Values the company based on projected future cash flows
  2. Dividend Discount Model (DDM): Values the company based on expected future dividend payments

Weighted Average Cost of Capital (WACC)

The cost of capital is a critical factor in valuation models, representing the required return for investors.

WACC Component Low High
Long-term bond rate 3.4% 3.9%
Equity market risk premium 4.7% 5.7%
Adjusted beta 0.9 1.02
Cost of equity 7.6% 10.2%
Cost of debt 4.0% 4.6%
Tax rate 28.8% 39.1%
Debt/Equity ratio 0.1 0.1
After-tax WACC 7.2% 9.5%

Valuation Methods

1. Discounted Cash Flow (DCF) Valuation

Our DCF model projects cash flows over 5-year and 10-year horizons, with the following key assumptions:

  • Forecast Period: 5-year DCF and 10-year DCF
  • Terminal Growth Rate: 0.0% (range: 3.0% - 5.0%)
  • Discount Rate: 8.4% (range: 0.0% - 9.3%)

Key Projections:

  • Revenue growth from $618 (FY12-2020) to $790 (FY12-2030)
  • Net profit margin expansion from -6% to 16%
  • Capital expenditures maintained at approximately 59% of revenue
DCF Model Fair Value Enterprise Value % from Terminal Value
5-Year Growth $3 $583M 113.9%
10-Year Growth $10 $1,833M 84.0%
5-Year EBITDA $14 $2,644M 103.1%
10-Year EBITDA $15 $2,761M 89.4%

2. Dividend Discount Model (DDM)

The DDM values a company based on its expected future dividend payments. We used two approaches:

Multi-Stage DDM:

  • Current payout ratio: 0.0%
  • Stable payout ratio: 90.0%
  • Growth transition: 5 years
  • Cost of equity: 8.9%
  • Long-term growth rate: 4.0%
  • Fair value: $8.52 (-55.5% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 10.2% (Low) to 7.6% (High)
  • Long-term growth rate: 3.0% (Low) to 5.0% (High)
  • Fair value range: $(1) to $(5)
  • Selected fair value: $-4.34 (-122.6% from current price)

Key Financial Metrics

Metric Value
Market Capitalization $3599M
Enterprise Value $3577M
Trailing P/E 0.00
Forward P/E 58.05
Trailing EV/EBITDA 8.00
Current Dividend Yield 0.00%
Dividend Growth Rate (5Y) 0.00%
Debt-to-Equity Ratio 0.10

Investment Decision Framework

To determine the most reliable intrinsic value estimate, we weigh each valuation method based on:

  1. Forecast Certainty: DCF methods rely on long-term projections, while earnings power value focuses on current normalized earnings
  2. Business Model Alignment: Dividend models are more appropriate for mature companies with established dividend policies
  3. Historical Accuracy: How well each method has predicted fair value historically

Valuation Weight Matrix

Valuation Method Weight Weighted Value
Discounted Cash Flow (10Y) 40% $3.78
Discounted Cash Flow (5Y) 33% $1.02
Dividend Discount Model (Multi-Stage) 27% $1.70
Weighted Average 100% $8.67

Investment Conclusion

Based on our comprehensive valuation analysis, Pretium Resources Inc's weighted average intrinsic value is $8.67, which is approximately 54.8% below the current market price of $19.15.

Key investment considerations:

  • Strong projected earnings growth (-6% to 16% margin)
  • Consistent cash flow generation
  • Conservative capital structure (Debt/Equity of 0.10)

Given these factors, we believe Pretium Resources Inc is currently significantly overvalued with the potential for long-term appreciation based on the company's growth trajectory and financial strength.