Intrinsic value of Enerplus Corporation - ERF

Previous Close

$11.55

  Intrinsic Value

$0.83

stock screener

  Rating & Target

str. sell

-93%

Previous close

$11.55

 
Intrinsic value

$0.83

 
Up/down potential

-93%

 
Rating

str. sell

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

We calculate the intrinsic value of ERF 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 2.8

 

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, %
  -18.21
  29.90
  27.41
  25.17
  23.15
  21.34
  19.70
  18.23
  16.91
  15.72
  14.65
  13.68
  12.81
  12.03
  11.33
  10.70
  10.13
  9.61
  9.15
  8.74
  8.36
  8.03
  7.72
  7.45
  7.21
  6.99
  6.79
  6.61
  6.45
  6.30
  6.17
Revenue, $m
  723
  939
  1,197
  1,498
  1,845
  2,238
  2,679
  3,168
  3,703
  4,285
  4,913
  5,585
  6,301
  7,059
  7,859
  8,699
  9,580
  10,501
  11,462
  12,464
  13,506
  14,591
  15,718
  16,889
  18,106
  19,371
  20,686
  22,053
  23,475
  24,954
  26,495
Variable operating expenses, $m
 
  2,612
  3,310
  4,127
  5,067
  6,135
  7,330
  8,655
  10,108
  11,686
  13,388
  15,146
  17,087
  19,143
  21,311
  23,591
  25,980
  28,478
  31,084
  33,800
  36,627
  39,567
  42,623
  45,800
  49,100
  52,531
  56,096
  59,803
  63,659
  67,672
  71,849
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
  528
  2,612
  3,310
  4,127
  5,067
  6,135
  7,330
  8,655
  10,108
  11,686
  13,388
  15,146
  17,087
  19,143
  21,311
  23,591
  25,980
  28,478
  31,084
  33,800
  36,627
  39,567
  42,623
  45,800
  49,100
  52,531
  56,096
  59,803
  63,659
  67,672
  71,849
Operating income, $m
  195
  -1,673
  -2,114
  -2,629
  -3,223
  -3,896
  -4,651
  -5,488
  -6,404
  -7,401
  -8,475
  -9,561
  -10,786
  -12,084
  -13,453
  -14,892
  -16,400
  -17,976
  -19,622
  -21,336
  -23,120
  -24,976
  -26,906
  -28,911
  -30,994
  -33,160
  -35,410
  -37,751
  -40,185
  -42,718
  -45,354
EBITDA, $m
  524
  -1,358
  -1,730
  -2,165
  -2,667
  -3,235
  -3,873
  -4,579
  -5,353
  -6,195
  -7,102
  -8,074
  -9,109
  -10,205
  -11,361
  -12,576
  -13,849
  -15,181
  -16,570
  -18,018
  -19,525
  -21,092
  -22,722
  -24,415
  -26,174
  -28,003
  -29,904
  -31,880
  -33,936
  -36,075
  -38,301
Interest expense (income), $m
  49
  38
  55
  75
  99
  127
  158
  194
  233
  275
  322
  372
  425
  483
  543
  607
  674
  744
  818
  894
  974
  1,057
  1,144
  1,234
  1,327
  1,424
  1,525
  1,630
  1,739
  1,852
  1,970
Earnings before tax, $m
  160
  -1,711
  -2,168
  -2,705
  -3,322
  -4,024
  -4,810
  -5,681
  -6,637
  -7,676
  -8,797
  -9,933
  -11,211
  -12,566
  -13,996
  -15,498
  -17,073
  -18,720
  -20,439
  -22,230
  -24,095
  -26,034
  -28,049
  -30,144
  -32,321
  -34,584
  -36,935
  -39,380
  -41,924
  -44,570
  -47,325
Tax expense, $m
  -237
  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
Net income, $m
  397
  -1,711
  -2,168
  -2,705
  -3,322
  -4,024
  -4,810
  -5,681
  -6,637
  -7,676
  -8,797
  -9,933
  -11,211
  -12,566
  -13,996
  -15,498
  -17,073
  -18,720
  -20,439
  -22,230
  -24,095
  -26,034
  -28,049
  -30,144
  -32,321
  -34,584
  -36,935
  -39,380
  -41,924
  -44,570
  -47,325

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  1
  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
  2,639
  3,428
  4,367
  5,466
  6,732
  8,168
  9,778
  11,560
  13,515
  15,640
  17,930
  20,384
  22,996
  25,763
  28,681
  31,749
  34,964
  38,326
  41,834
  45,489
  49,293
  53,250
  57,363
  61,638
  66,080
  70,697
  75,496
  80,485
  85,674
  91,075
  96,697
Adjusted assets (=assets-cash), $m
  2,638
  3,428
  4,367
  5,466
  6,732
  8,168
  9,778
  11,560
  13,515
  15,640
  17,930
  20,384
  22,996
  25,763
  28,681
  31,749
  34,964
  38,326
  41,834
  45,489
  49,293
  53,250
  57,363
  61,638
  66,080
  70,697
  75,496
  80,485
  85,674
  91,075
  96,697
Revenue / Adjusted assets
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
Average production assets, $m
  962
  1,250
  1,593
  1,994
  2,455
  2,979
  3,566
  4,216
  4,929
  5,704
  6,539
  7,434
  8,386
  9,395
  10,460
  11,579
  12,751
  13,977
  15,256
  16,589
  17,977
  19,420
  20,920
  22,479
  24,099
  25,783
  27,533
  29,352
  31,245
  33,214
  35,265
Working capital, $m
  270
  389
  495
  620
  764
  927
  1,109
  1,311
  1,533
  1,774
  2,034
  2,312
  2,609
  2,922
  3,253
  3,601
  3,966
  4,348
  4,745
  5,160
  5,592
  6,040
  6,507
  6,992
  7,496
  8,020
  8,564
  9,130
  9,719
  10,331
  10,969
Total debt, $m
  769
  1,120
  1,539
  2,029
  2,593
  3,234
  3,952
  4,747
  5,619
  6,566
  7,588
  8,682
  9,847
  11,081
  12,383
  13,751
  15,185
  16,684
  18,249
  19,879
  21,576
  23,341
  25,175
  27,082
  29,063
  31,122
  33,262
  35,487
  37,802
  40,210
  42,718
Total liabilities, $m
  1,178
  1,529
  1,948
  2,438
  3,002
  3,643
  4,361
  5,156
  6,028
  6,975
  7,997
  9,091
  10,256
  11,490
  12,792
  14,160
  15,594
  17,093
  18,658
  20,288
  21,985
  23,750
  25,584
  27,491
  29,472
  31,531
  33,671
  35,896
  38,211
  40,619
  43,127
Total equity, $m
  1,461
  1,899
  2,419
  3,028
  3,729
  4,525
  5,417
  6,405
  7,487
  8,664
  9,933
  11,293
  12,740
  14,272
  15,889
  17,589
  19,370
  21,232
  23,176
  25,201
  27,308
  29,501
  31,779
  34,148
  36,609
  39,166
  41,825
  44,589
  47,464
  50,455
  53,570
Total liabilities and equity, $m
  2,639
  3,428
  4,367
  5,466
  6,731
  8,168
  9,778
  11,561
  13,515
  15,639
  17,930
  20,384
  22,996
  25,762
  28,681
  31,749
  34,964
  38,325
  41,834
  45,489
  49,293
  53,251
  57,363
  61,639
  66,081
  70,697
  75,496
  80,485
  85,675
  91,074
  96,697
Debt-to-equity ratio
  0.526
  0.590
  0.640
  0.670
  0.700
  0.710
  0.730
  0.740
  0.750
  0.760
  0.760
  0.770
  0.770
  0.780
  0.780
  0.780
  0.780
  0.790
  0.790
  0.790
  0.790
  0.790
  0.790
  0.790
  0.790
  0.790
  0.800
  0.800
  0.800
  0.800
  0.800
Adjusted equity ratio
  0.553
  0.554
  0.554
  0.554
  0.554
  0.554
  0.554
  0.554
  0.554
  0.554
  0.554
  0.554
  0.554
  0.554
  0.554
  0.554
  0.554
  0.554
  0.554
  0.554
  0.554
  0.554
  0.554
  0.554
  0.554
  0.554
  0.554
  0.554
  0.554
  0.554
  0.554

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  397
  -1,711
  -2,168
  -2,705
  -3,322
  -4,024
  -4,810
  -5,681
  -6,637
  -7,676
  -8,797
  -9,933
  -11,211
  -12,566
  -13,996
  -15,498
  -17,073
  -18,720
  -20,439
  -22,230
  -24,095
  -26,034
  -28,049
  -30,144
  -32,321
  -34,584
  -36,935
  -39,380
  -41,924
  -44,570
  -47,325
Depreciation, amort., depletion, $m
  329
  315
  384
  464
  556
  661
  778
  908
  1,051
  1,206
  1,373
  1,487
  1,677
  1,879
  2,092
  2,316
  2,550
  2,795
  3,051
  3,318
  3,595
  3,884
  4,184
  4,496
  4,820
  5,157
  5,507
  5,870
  6,249
  6,643
  7,053
Funds from operations, $m
  319
  -1,395
  -1,785
  -2,241
  -2,766
  -3,363
  -4,031
  -4,773
  -5,586
  -6,470
  -7,424
  -8,446
  -9,534
  -10,687
  -11,904
  -13,183
  -14,523
  -15,925
  -17,388
  -18,912
  -20,499
  -22,150
  -23,865
  -25,648
  -27,501
  -29,427
  -31,429
  -33,510
  -35,675
  -37,927
  -40,272
Change in working capital, $m
  7
  89
  107
  125
  144
  163
  183
  202
  222
  241
  260
  278
  296
  314
  331
  348
  365
  381
  398
  415
  432
  449
  467
  485
  504
  524
  544
  566
  589
  613
  638
Cash from operations, $m
  312
  -1,485
  -1,891
  -2,365
  -2,909
  -3,525
  -4,214
  -4,975
  -5,808
  -6,711
  -7,684
  -8,724
  -9,830
  -11,001
  -12,235
  -13,531
  -14,888
  -16,306
  -17,786
  -19,327
  -20,931
  -22,598
  -24,332
  -26,133
  -28,005
  -29,951
  -31,973
  -34,076
  -36,263
  -38,540
  -40,910
Maintenance CAPEX, $m
  0
  -192
  -250
  -319
  -399
  -491
  -596
  -713
  -843
  -986
  -1,141
  -1,308
  -1,487
  -1,677
  -1,879
  -2,092
  -2,316
  -2,550
  -2,795
  -3,051
  -3,318
  -3,595
  -3,884
  -4,184
  -4,496
  -4,820
  -5,157
  -5,507
  -5,870
  -6,249
  -6,643
New CAPEX, $m
  -337
  -288
  -343
  -401
  -462
  -524
  -587
  -650
  -713
  -775
  -835
  -895
  -953
  -1,009
  -1,064
  -1,119
  -1,173
  -1,226
  -1,279
  -1,333
  -1,387
  -1,443
  -1,500
  -1,559
  -1,620
  -1,684
  -1,750
  -1,820
  -1,893
  -1,969
  -2,050
Cash from investing activities, $m
  -108
  -480
  -593
  -720
  -861
  -1,015
  -1,183
  -1,363
  -1,556
  -1,761
  -1,976
  -2,203
  -2,440
  -2,686
  -2,943
  -3,211
  -3,489
  -3,776
  -4,074
  -4,384
  -4,705
  -5,038
  -5,384
  -5,743
  -6,116
  -6,504
  -6,907
  -7,327
  -7,763
  -8,218
  -8,693
Free cash flow, $m
  204
  -1,965
  -2,484
  -3,085
  -3,770
  -4,540
  -5,397
  -6,338
  -7,364
  -8,472
  -9,660
  -10,927
  -12,270
  -13,687
  -15,178
  -16,741
  -18,376
  -20,082
  -21,860
  -23,711
  -25,636
  -27,637
  -29,716
  -31,876
  -34,121
  -36,454
  -38,880
  -41,402
  -44,026
  -46,758
  -49,603
Issuance/(repayment) of debt, $m
  -391
  352
  419
  490
  564
  641
  718
  795
  872
  947
  1,022
  1,094
  1,165
  1,234
  1,302
  1,368
  1,434
  1,499
  1,564
  1,630
  1,697
  1,765
  1,835
  1,907
  1,981
  2,059
  2,140
  2,225
  2,315
  2,408
  2,507
Issuance/(repurchase) of shares, $m
  220
  2,148
  2,689
  3,313
  4,023
  4,819
  5,701
  6,669
  7,720
  8,853
  10,066
  11,292
  12,658
  14,099
  15,613
  17,198
  18,855
  20,583
  22,382
  24,255
  26,202
  28,226
  30,328
  32,513
  34,782
  37,141
  39,594
  42,144
  44,799
  47,562
  50,439
Cash from financing (excl. dividends), $m  
  -175
  2,500
  3,108
  3,803
  4,587
  5,460
  6,419
  7,464
  8,592
  9,800
  11,088
  12,386
  13,823
  15,333
  16,915
  18,566
  20,289
  22,082
  23,946
  25,885
  27,899
  29,991
  32,163
  34,420
  36,763
  39,200
  41,734
  44,369
  47,114
  49,970
  52,946
Total cash flow (excl. dividends), $m
  29
  535
  624
  719
  818
  920
  1,022
  1,126
  1,228
  1,329
  1,428
  1,459
  1,554
  1,646
  1,736
  1,825
  1,912
  1,999
  2,086
  2,174
  2,263
  2,354
  2,447
  2,543
  2,642
  2,746
  2,854
  2,968
  3,087
  3,212
  3,344
Retained Cash Flow (-), $m
  -563
  -2,148
  -2,689
  -3,313
  -4,023
  -4,819
  -5,701
  -6,669
  -7,720
  -8,853
  -10,066
  -11,292
  -12,658
  -14,099
  -15,613
  -17,198
  -18,855
  -20,583
  -22,382
  -24,255
  -26,202
  -28,226
  -30,328
  -32,513
  -34,782
  -37,141
  -39,594
  -42,144
  -44,799
  -47,562
  -50,439
Prev. year cash balance distribution, $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 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
 
  -1,614
  -2,065
  -2,594
  -3,205
  -3,900
  -4,679
  -5,543
  -6,492
  -7,524
  -8,638
  -9,832
  -11,105
  -12,453
  -13,877
  -15,373
  -16,942
  -18,583
  -20,296
  -22,081
  -23,939
  -25,872
  -27,882
  -29,970
  -32,140
  -34,395
  -36,739
  -39,177
  -41,712
  -44,349
  -47,095
Discount rate, %
 
  5.60
  5.88
  6.17
  6.48
  6.81
  7.15
  7.50
  7.88
  8.27
  8.69
  9.12
  9.58
  10.06
  10.56
  11.09
  11.64
  12.22
  12.84
  13.48
  14.15
  14.86
  15.60
  16.38
  17.20
  18.06
  18.96
  19.91
  20.91
  21.95
  23.05
PV of cash for distribution, $m
 
  -1,528
  -1,842
  -2,168
  -2,493
  -2,806
  -3,092
  -3,340
  -3,539
  -3,679
  -3,755
  -3,764
  -3,705
  -3,583
  -3,404
  -3,175
  -2,909
  -2,616
  -2,309
  -1,999
  -1,696
  -1,411
  -1,148
  -915
  -712
  -542
  -402
  -291
  -205
  -140
  -93
Current shareholders' claim on cash, %
  100
  56.6
  32.5
  19.0
  11.2
  6.7
  4.0
  2.5
  1.5
  0.9
  0.6
  0.4
  0.2
  0.1
  0.1
  0.1
  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

Enerplus Corporation is an oil and natural gas company. The Company's oil and natural gas property interests are located in the United States, primarily in North Dakota, Montana, and Pennsylvania, as well as in western Canada in the provinces of Alberta, British Columbia and Saskatchewan. The Company's oil and natural gas property interests contains proved plus probable gross reserves of approximately 14.3 million barrels (MMbbls) of light and medium crude oil, 39.0 MMbbls of heavy crude oil, 123 MMbbls of tight oil, 18.1 MMbbls of natural gas liquids (NGLs), 126.3 billion cubic feet (Bcf) of conventional natural gas and 1,002.8 Bcf of shale gas, for a total of approximately 382.5 million barrels of oil equivalent (MMBOE). The Company's primary crude oil properties in the United States are located in the Fort Berthold region of North Dakota and in Richland County, Montana.

FINANCIAL RATIOS  of  Enerplus Corporation (ERF)

Valuation Ratios
P/E Ratio 7
Price to Sales 3.8
Price to Book 1.9
Price to Tangible Book
Price to Cash Flow 8.9
Price to Free Cash Flow -111.1
Growth Rates
Sales Growth Rate -18.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -33.5%
Cap. Spend. - 3 Yr. Gr. Rate -18.4%
Financial Strength
Quick Ratio 0
Current Ratio 1.6
LT Debt to Equity 50.6%
Total Debt to Equity 52.6%
Interest Coverage 4
Management Effectiveness
Return On Assets 19.9%
Ret/ On Assets - 3 Yr. Avg. -5.2%
Return On Total Capital 18.2%
Ret/ On T. Cap. - 3 Yr. Avg. -9.3%
Return On Equity 33.7%
Return On Equity - 3 Yr. Avg. -16.5%
Asset Turnover 0.3
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 74.4%
EBITDA Margin - 3 Yr. Avg. 5.8%
Operating Margin 27%
Oper. Margin - 3 Yr. Avg. -44%
Pre-Tax Margin 22.1%
Pre-Tax Margin - 3 Yr. Avg. -46.8%
Net Profit Margin 54.9%
Net Profit Margin - 3 Yr. Avg. -32.6%
Effective Tax Rate -148.1%
Eff/ Tax Rate - 3 Yr. Avg. -35.5%
Payout Ratio 8.8%

ERF stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ERF stock intrinsic value calculation we used $723 million for the last fiscal year's total revenue generated by Enerplus Corporation. The default revenue input number comes from 2016 income statement of Enerplus Corporation. 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 ERF stock valuation model: a) initial revenue growth rate of 29.9% 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 5.6%, whose default value for ERF is calculated based on our internal credit rating of Enerplus Corporation, 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 Enerplus Corporation.
    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 ERF stock the variable cost ratio is equal to 280.2%.

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 ERF 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 Enerplus Corporation.

Corporate tax rate of 27% is the nominal tax rate for Enerplus Corporation. 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 ERF 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 ERF are equal to 133.1%.

Life of production assets of 4.9 years is the average useful life of capital assets used in Enerplus Corporation 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 ERF is equal to 41.4%. 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 - $1461 million for Enerplus Corporation - 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 242.424 million for Enerplus Corporation 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 Enerplus Corporation at the current share price and the inputted number of shares is $2.8 billion.

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Financial statements of ERF
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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