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Electronic Arts Inc. (ERTS) Message Board

dansmith46 2 posts  |  Last Activity: Mar 14, 2015 9:09 PM Member since: Jan 10, 2012
  • Reply to

    Free cash flow change is a wash, NEM undervalued

    by dansmith46 Mar 11, 2015 11:04 AM dansmith46 Mar 14, 2015 9:09 PM Flag

    I meant to say the drop in the price of oil gains them $75 million.

    In a simpler layout it is like this:
    $50 decline in price of gold = -$150 million
    $0.15 decline in price of copper = -$30 million
    $25 decline in price of oil = +$75 million
    $0.09 drop in Australian dollar = +$110 million

    Grand total is +$5 million. So while their share price has declined with the price of gold, the declines in input costs have slightly more than offset the drop in the price of gold and copper. Thus their share price is at least near term undervalued

  • If you look at the most recent investor presentation you will see a slide on how they expect fcf to change based on fluctuations of different items. With the most recent gold decline they lose $150 million in FCF, and with copper declining as well they lose $180 million in FCF. However the drop in the price of gold gains them $75 million in FCF and the drop in the Australian dollar gains them $110 million in FCF. Thus they actually gain a minor $5 million in FCF from recent developments. Thus the recent changes are a wash and yet NEM's share price has continued to drop with the price of gold.

    Also for anyone who was wondering, energy is approximately 12% of their total costs, so stop blabbering on about how energy is 50% of their costs

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