Intrinsic value of Badger Daylighting Ltd. - BAD

Previous Close

$29.40

  Intrinsic Value

$8.55

stock screener

  Rating & Target

str. sell

-71%

Previous close

$29.40

 
Intrinsic value

$8.55

 
Up/down potential

-71%

 
Rating

str. sell

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of BAD stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 1.1

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  -0.25
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  404
  412
  422
  432
  445
  458
  473
  489
  506
  525
  545
  567
  590
  614
  640
  668
  697
  728
  761
  796
  832
  871
  911
  954
  1,000
  1,047
  1,097
  1,150
  1,205
  1,264
  1,325
Variable operating expenses, $m
 
  364
  373
  382
  393
  405
  418
  432
  448
  464
  482
  501
  521
  543
  566
  590
  616
  643
  672
  703
  735
  769
  805
  843
  883
  925
  969
  1,016
  1,065
  1,117
  1,171
Fixed operating expenses, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  350
  364
  373
  382
  393
  405
  418
  432
  448
  464
  482
  501
  521
  543
  566
  590
  616
  643
  672
  703
  735
  769
  805
  843
  883
  925
  969
  1,016
  1,065
  1,117
  1,171
Operating income, $m
  54
  48
  49
  50
  52
  53
  55
  57
  59
  61
  63
  66
  69
  72
  75
  78
  81
  85
  89
  93
  97
  101
  106
  111
  116
  122
  128
  134
  140
  147
  154
EBITDA, $m
  97
  91
  93
  96
  99
  102
  105
  108
  112
  116
  121
  126
  131
  136
  142
  148
  155
  161
  169
  176
  184
  193
  202
  212
  222
  232
  243
  255
  267
  280
  294
Interest expense (income), $m
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  8
  8
  8
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  24
Earnings before tax, $m
  47
  43
  44
  45
  46
  47
  49
  50
  52
  54
  56
  58
  60
  63
  65
  68
  71
  74
  77
  80
  84
  87
  91
  95
  100
  104
  109
  114
  119
  125
  131
Tax expense, $m
  18
  12
  12
  12
  12
  13
  13
  14
  14
  15
  15
  16
  16
  17
  18
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  31
  32
  34
  35
Net income, $m
  29
  31
  32
  33
  34
  35
  36
  37
  38
  39
  41
  42
  44
  46
  48
  49
  52
  54
  56
  58
  61
  64
  67
  70
  73
  76
  80
  83
  87
  91
  95

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  63
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  458
  403
  412
  423
  435
  448
  462
  478
  495
  513
  533
  554
  577
  601
  626
  653
  682
  712
  744
  778
  814
  851
  891
  933
  977
  1,024
  1,073
  1,124
  1,178
  1,235
  1,295
Adjusted assets (=assets-cash), $m
  395
  403
  412
  423
  435
  448
  462
  478
  495
  513
  533
  554
  577
  601
  626
  653
  682
  712
  744
  778
  814
  851
  891
  933
  977
  1,024
  1,073
  1,124
  1,178
  1,235
  1,295
Revenue / Adjusted assets
  1.023
  1.022
  1.024
  1.021
  1.023
  1.022
  1.024
  1.023
  1.022
  1.023
  1.023
  1.023
  1.023
  1.022
  1.022
  1.023
  1.022
  1.022
  1.023
  1.023
  1.022
  1.024
  1.022
  1.023
  1.024
  1.022
  1.022
  1.023
  1.023
  1.023
  1.023
Average production assets, $m
  306
  312
  319
  327
  337
  347
  358
  370
  383
  398
  413
  429
  447
  465
  485
  506
  528
  551
  576
  602
  630
  659
  690
  722
  757
  793
  831
  871
  913
  957
  1,003
Working capital, $m
  121
  59
  61
  62
  64
  66
  68
  70
  73
  76
  79
  82
  85
  88
  92
  96
  100
  105
  110
  115
  120
  125
  131
  137
  144
  151
  158
  166
  174
  182
  191
Total debt, $m
  101
  104
  109
  113
  119
  125
  131
  139
  146
  155
  163
  173
  183
  194
  206
  218
  231
  244
  259
  274
  291
  308
  326
  345
  365
  386
  408
  431
  456
  482
  509
Total liabilities, $m
  179
  182
  187
  191
  197
  203
  209
  217
  224
  233
  241
  251
  261
  272
  284
  296
  309
  322
  337
  352
  369
  386
  404
  423
  443
  464
  486
  509
  534
  560
  587
Total equity, $m
  279
  220
  225
  231
  238
  245
  253
  261
  271
  281
  292
  303
  315
  328
  342
  357
  373
  389
  407
  425
  445
  466
  487
  510
  534
  560
  587
  615
  645
  676
  709
Total liabilities and equity, $m
  458
  402
  412
  422
  435
  448
  462
  478
  495
  514
  533
  554
  576
  600
  626
  653
  682
  711
  744
  777
  814
  852
  891
  933
  977
  1,024
  1,073
  1,124
  1,179
  1,236
  1,296
Debt-to-equity ratio
  0.362
  0.470
  0.480
  0.490
  0.500
  0.510
  0.520
  0.530
  0.540
  0.550
  0.560
  0.570
  0.580
  0.590
  0.600
  0.610
  0.620
  0.630
  0.640
  0.640
  0.650
  0.660
  0.670
  0.680
  0.680
  0.690
  0.700
  0.700
  0.710
  0.710
  0.720
Adjusted equity ratio
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547
  0.547

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  29
  31
  32
  33
  34
  35
  36
  37
  38
  39
  41
  42
  44
  46
  48
  49
  52
  54
  56
  58
  61
  64
  67
  70
  73
  76
  80
  83
  87
  91
  95
Depreciation, amort., depletion, $m
  43
  44
  45
  46
  47
  48
  50
  52
  53
  55
  58
  60
  62
  65
  67
  70
  73
  77
  80
  84
  87
  92
  96
  100
  105
  110
  115
  121
  127
  133
  139
Funds from operations, $m
  56
  75
  76
  78
  81
  83
  86
  88
  91
  95
  98
  102
  106
  110
  115
  120
  125
  130
  136
  142
  148
  155
  162
  170
  178
  186
  195
  204
  214
  224
  235
Change in working capital, $m
  -23
  1
  1
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
Cash from operations, $m
  79
  74
  75
  77
  79
  81
  83
  86
  89
  92
  95
  99
  103
  107
  111
  116
  121
  126
  131
  137
  143
  150
  156
  164
  171
  179
  188
  197
  206
  216
  226
Maintenance CAPEX, $m
  0
  -43
  -43
  -44
  -45
  -47
  -48
  -50
  -51
  -53
  -55
  -57
  -60
  -62
  -65
  -67
  -70
  -73
  -77
  -80
  -84
  -87
  -92
  -96
  -100
  -105
  -110
  -115
  -121
  -127
  -133
New CAPEX, $m
  -23
  -6
  -7
  -8
  -9
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -19
  -20
  -21
  -22
  -23
  -25
  -26
  -28
  -29
  -31
  -32
  -34
  -36
  -38
  -40
  -42
  -44
  -46
Cash from investing activities, $m
  -22
  -49
  -50
  -52
  -54
  -57
  -59
  -62
  -64
  -67
  -70
  -73
  -77
  -81
  -85
  -88
  -92
  -96
  -102
  -106
  -112
  -116
  -123
  -128
  -134
  -141
  -148
  -155
  -163
  -171
  -179
Free cash flow, $m
  57
  25
  25
  24
  24
  24
  24
  24
  24
  25
  25
  25
  26
  26
  27
  27
  28
  29
  30
  31
  32
  33
  34
  35
  37
  38
  40
  41
  43
  45
  47
Issuance/(repayment) of debt, $m
  0
  3
  4
  5
  5
  6
  7
  7
  8
  8
  9
  10
  10
  11
  12
  12
  13
  14
  15
  15
  16
  17
  18
  19
  20
  21
  22
  23
  25
  26
  27
Issuance/(repurchase) of shares, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  -5
  3
  4
  5
  5
  6
  7
  7
  8
  8
  9
  10
  10
  11
  12
  12
  13
  14
  15
  15
  16
  17
  18
  19
  20
  21
  22
  23
  25
  26
  27
Total cash flow (excl. dividends), $m
  52
  29
  29
  29
  30
  30
  31
  31
  32
  33
  34
  35
  36
  37
  38
  40
  41
  43
  44
  46
  48
  50
  52
  54
  57
  59
  62
  65
  67
  71
  74
Retained Cash Flow (-), $m
  -11
  -4
  -5
  -6
  -7
  -7
  -8
  -9
  -9
  -10
  -11
  -12
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -27
  -28
  -30
  -31
  -33
Prev. year cash balance distribution, $m
 
  63
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  87
  24
  23
  23
  23
  23
  23
  23
  23
  23
  23
  24
  24
  24
  25
  26
  26
  27
  28
  29
  29
  30
  31
  33
  34
  35
  36
  38
  39
  41
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  84
  22
  20
  19
  18
  16
  15
  14
  13
  12
  11
  10
  9
  8
  7
  6
  6
  5
  4
  4
  3
  3
  2
  2
  1
  1
  1
  1
  0
  0
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
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Badger Daylighting Ltd. (Badger) is a provider of non-destructive excavating services. The Company works for contractors and facility owners in the utility and petroleum industries. The Company operates in three divisions: rents and sells various lines of trench shielding used to shore and strengthen trenches dug for a range of purposes; provides sewer inspection services and limited sewer flush services, and provides general vacuum truck and auxiliary services to the oil and gas industry, focusing primarily on production tank cleaning and removal of waste oil and sand. Badger's technology, Badger Hydrovac, is used for digging in congested grounds and challenging conditions. The Badger Hydrovac uses a pressurized water stream to liquefy the soil cover, which is then removed with a vacuum system and deposited into a storage tank. Badger manufactures its truck-mounted hydrovac units. The Company provides hydrovac services to various clients in Canada and the United States.

FINANCIAL RATIOS  of  Badger Daylighting Ltd. (BAD)

Valuation Ratios
P/E Ratio 37.6
Price to Sales 2.7
Price to Book 3.9
Price to Tangible Book
Price to Cash Flow 13.8
Price to Free Cash Flow 19.5
Growth Rates
Sales Growth Rate -0.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -41%
Cap. Spend. - 3 Yr. Gr. Rate -20.6%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 36.2%
Total Debt to Equity 36.2%
Interest Coverage 10
Management Effectiveness
Return On Assets 7.1%
Ret/ On Assets - 3 Yr. Avg. 10.5%
Return On Total Capital 7.7%
Ret/ On T. Cap. - 3 Yr. Avg. 12%
Return On Equity 10.6%
Return On Equity - 3 Yr. Avg. 17.6%
Asset Turnover 0.9
Profitability Ratios
Gross Margin 29.7%
Gross Margin - 3 Yr. Avg. 30.4%
EBITDA Margin 23.5%
EBITDA Margin - 3 Yr. Avg. 24.3%
Operating Margin 13.4%
Oper. Margin - 3 Yr. Avg. 14.9%
Pre-Tax Margin 11.6%
Pre-Tax Margin - 3 Yr. Avg. 13.1%
Net Profit Margin 7.2%
Net Profit Margin - 3 Yr. Avg. 9.7%
Effective Tax Rate 38.3%
Eff/ Tax Rate - 3 Yr. Avg. 24.7%
Payout Ratio 48.3%

BAD stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the BAD stock intrinsic value calculation we used $404 million for the last fiscal year's total revenue generated by Badger Daylighting Ltd.. The default revenue input number comes from 2016 income statement of Badger Daylighting Ltd.. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our BAD stock valuation model: a) initial revenue growth rate of 2% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for BAD is calculated based on our internal credit rating of Badger Daylighting Ltd., is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Badger Daylighting Ltd..
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of BAD stock the variable cost ratio is equal to 88.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for BAD stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 4.9% for Badger Daylighting Ltd..

Corporate tax rate of 27% is the nominal tax rate for Badger Daylighting Ltd.. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the BAD stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for BAD are equal to 75.7%.

Life of production assets of 7.2 years is the average useful life of capital assets used in Badger Daylighting Ltd. operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for BAD is equal to 14.4%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $279 million for Badger Daylighting Ltd. - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 37.276 million for Badger Daylighting Ltd. is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Badger Daylighting Ltd. at the current share price and the inputted number of shares is $1.1 billion.

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Financial statements of BAD
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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