NPV and Target PriceIt's also good to keep in mind we are calculating NPV per share. That isn't the same as a price target. NPV per share basically means if the information in the economic analysis of the PEA, PFS, or Bankable Feasibility Study is valid, then this is the intrinsic value of the project to the shareholder. The watchword here is IF. It's common for a Bankable Feasibility Study to underestimate costs by 20%. Why? Because the company hired the engineers and pays them for the study. The company is the customer. And that customer may exert a lot of pressure to improve the bottom line. Everyone likes to please the customer, whether at Speedy Muffler or on Bay Street. That's how you get repeat customers. One project from Novagold was cancelled because it turned out CAPEX was double the original estimate. The loss was in the billions.
PEA and PFS studies are even less accurate, and can be off by 50% or more. I'm not saying this is the case here, but it happens a lot. So, although NPV per share is useful, it's not necessarily that useful for setting a price target. It's still a spec play, and there is a lot of latitude for share price movements. Because of this, I prefer to use NPV as a general gauge to see if share price is way out of line. Instead of a definitive price target, it can be more useful to define a trading range.