Intrinsic value of Hemisphere Energy Corporation - HME

Previous Close

$0.26

  Intrinsic Value

$0.06

stock screener

  Rating & Target

str. sell

-76%

  Value-price divergence*

0%

Previous close

$0.26

 
Intrinsic value

$0.06

 
Up/down potential

-76%

 
Rating

str. sell

 
Value-price divergence*

0%

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

We calculate the intrinsic value of HME 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 0.0

 

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, %
  -33.33
  60.00
  54.50
  49.55
  45.10
  41.09
  37.48
  34.23
  31.31
  28.68
  26.31
  24.18
  22.26
  20.53
  18.98
  17.58
  16.32
  15.19
  14.17
  13.26
  12.43
  11.69
  11.02
  10.42
  9.87
  9.39
  8.95
  8.55
  8.20
  7.88
  7.59
Revenue, $m
  6
  10
  15
  22
  32
  45
  62
  84
  110
  142
  179
  222
  271
  327
  389
  458
  533
  613
  700
  793
  892
  996
  1,106
  1,221
  1,341
  1,467
  1,599
  1,735
  1,878
  2,026
  2,179
Variable operating expenses, $m
 
  16
  25
  37
  54
  76
  104
  140
  183
  236
  298
  370
  453
  545
  649
  763
  888
  1,023
  1,167
  1,322
  1,487
  1,660
  1,843
  2,035
  2,236
  2,446
  2,665
  2,893
  3,130
  3,377
  3,633
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
  8
  16
  25
  37
  54
  76
  104
  140
  183
  236
  298
  370
  453
  545
  649
  763
  888
  1,023
  1,167
  1,322
  1,487
  1,660
  1,843
  2,035
  2,236
  2,446
  2,665
  2,893
  3,130
  3,377
  3,633
Operating income, $m
  -2
  -6
  -10
  -15
  -21
  -30
  -42
  -56
  -73
  -94
  -119
  -148
  -181
  -218
  -260
  -305
  -355
  -409
  -467
  -529
  -595
  -664
  -738
  -814
  -895
  -979
  -1,066
  -1,158
  -1,252
  -1,351
  -1,454
EBITDA, $m
  1
  -6
  -10
  -15
  -21
  -30
  -42
  -56
  -73
  -94
  -119
  -148
  -181
  -218
  -260
  -305
  -355
  -409
  -467
  -529
  -595
  -664
  -738
  -814
  -895
  -979
  -1,066
  -1,158
  -1,252
  -1,351
  -1,454
Interest expense (income), $m
  0
  0
  1
  1
  2
  3
  5
  6
  9
  11
  15
  19
  23
  28
  34
  41
  48
  56
  64
  73
  83
  93
  104
  116
  128
  141
  154
  168
  182
  197
  212
Earnings before tax, $m
  -3
  -7
  -11
  -16
  -24
  -33
  -46
  -62
  -82
  -106
  -134
  -167
  -204
  -247
  -294
  -346
  -403
  -465
  -531
  -602
  -678
  -758
  -842
  -930
  -1,023
  -1,119
  -1,220
  -1,325
  -1,434
  -1,548
  -1,666
Tax expense, $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
Net income, $m
  -3
  -7
  -11
  -16
  -24
  -33
  -46
  -62
  -82
  -106
  -134
  -167
  -204
  -247
  -294
  -346
  -403
  -465
  -531
  -602
  -678
  -758
  -842
  -930
  -1,023
  -1,119
  -1,220
  -1,325
  -1,434
  -1,548
  -1,666

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $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
Total assets, $m
  40
  64
  99
  148
  215
  303
  416
  559
  733
  944
  1,192
  1,480
  1,810
  2,181
  2,596
  3,052
  3,550
  4,089
  4,669
  5,288
  5,945
  6,640
  7,372
  8,139
  8,943
  9,783
  10,658
  11,570
  12,518
  13,504
  14,529
Adjusted assets (=assets-cash), $m
  40
  64
  99
  148
  215
  303
  416
  559
  733
  944
  1,192
  1,480
  1,810
  2,181
  2,596
  3,052
  3,550
  4,089
  4,669
  5,288
  5,945
  6,640
  7,372
  8,139
  8,943
  9,783
  10,658
  11,570
  12,518
  13,504
  14,529
Revenue / Adjusted assets
  0.150
  0.156
  0.152
  0.149
  0.149
  0.149
  0.149
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
  0.150
Average production assets, $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
Working capital, $m
  -12
  -2
  -2
  -4
  -5
  -8
  -10
  -14
  -18
  -24
  -30
  -37
  -45
  -55
  -65
  -76
  -89
  -102
  -117
  -132
  -149
  -166
  -185
  -204
  -224
  -245
  -267
  -290
  -314
  -338
  -364
Total debt, $m
  11
  22
  37
  60
  90
  129
  180
  244
  323
  418
  529
  659
  807
  975
  1,161
  1,366
  1,591
  1,833
  2,094
  2,373
  2,668
  2,981
  3,310
  3,656
  4,017
  4,395
  4,789
  5,199
  5,626
  6,070
  6,531
Total liabilities, $m
  18
  29
  44
  67
  97
  136
  187
  251
  330
  425
  536
  666
  814
  982
  1,168
  1,373
  1,598
  1,840
  2,101
  2,380
  2,675
  2,988
  3,317
  3,663
  4,024
  4,402
  4,796
  5,206
  5,633
  6,077
  6,538
Total equity, $m
  22
  35
  54
  81
  118
  166
  229
  307
  403
  519
  656
  814
  995
  1,200
  1,428
  1,679
  1,953
  2,249
  2,568
  2,908
  3,270
  3,652
  4,054
  4,477
  4,919
  5,380
  5,862
  6,363
  6,885
  7,427
  7,991
Total liabilities and equity, $m
  40
  64
  98
  148
  215
  302
  416
  558
  733
  944
  1,192
  1,480
  1,809
  2,182
  2,596
  3,052
  3,551
  4,089
  4,669
  5,288
  5,945
  6,640
  7,371
  8,140
  8,943
  9,782
  10,658
  11,569
  12,518
  13,504
  14,529
Debt-to-equity ratio
  0.500
  0.620
  0.690
  0.730
  0.760
  0.780
  0.790
  0.800
  0.800
  0.800
  0.810
  0.810
  0.810
  0.810
  0.810
  0.810
  0.810
  0.820
  0.820
  0.820
  0.820
  0.820
  0.820
  0.820
  0.820
  0.820
  0.820
  0.820
  0.820
  0.820
  0.820
Adjusted equity ratio
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -3
  -7
  -11
  -16
  -24
  -33
  -46
  -62
  -82
  -106
  -134
  -167
  -204
  -247
  -294
  -346
  -403
  -465
  -531
  -602
  -678
  -758
  -842
  -930
  -1,023
  -1,119
  -1,220
  -1,325
  -1,434
  -1,548
  -1,666
Depreciation, amort., depletion, $m
  3
  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
Funds from operations, $m
  0
  -7
  -11
  -16
  -24
  -33
  -46
  -62
  -82
  -106
  -134
  -167
  -204
  -247
  -294
  -346
  -403
  -465
  -531
  -602
  -678
  -758
  -842
  -930
  -1,023
  -1,119
  -1,220
  -1,325
  -1,434
  -1,548
  -1,666
Change in working capital, $m
  0
  -1
  -1
  -1
  -2
  -2
  -3
  -4
  -4
  -5
  -6
  -7
  -8
  -9
  -10
  -11
  -12
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
Cash from operations, $m
  0
  -6
  -10
  -15
  -22
  -31
  -43
  -59
  -78
  -100
  -128
  -159
  -196
  -237
  -283
  -335
  -391
  -451
  -517
  -587
  -661
  -740
  -824
  -911
  -1,003
  -1,098
  -1,198
  -1,302
  -1,411
  -1,523
  -1,640
Maintenance CAPEX, $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
New CAPEX, $m
  -3
  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 investing activities, $m
  -3
  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
Free cash flow, $m
  -3
  -6
  -10
  -15
  -22
  -31
  -43
  -59
  -78
  -100
  -128
  -159
  -196
  -237
  -283
  -335
  -391
  -451
  -517
  -587
  -661
  -740
  -824
  -911
  -1,003
  -1,098
  -1,198
  -1,302
  -1,411
  -1,523
  -1,640
Issuance/(repayment) of debt, $m
  0
  11
  16
  22
  30
  40
  51
  64
  79
  95
  112
  130
  148
  167
  186
  205
  224
  243
  261
  278
  296
  313
  329
  346
  362
  378
  394
  410
  427
  444
  461
Issuance/(repurchase) of shares, $m
  2
  20
  30
  43
  60
  82
  109
  141
  178
  221
  270
  325
  385
  451
  522
  597
  677
  761
  850
  943
  1,039
  1,140
  1,244
  1,353
  1,465
  1,581
  1,702
  1,827
  1,956
  2,090
  2,230
Cash from financing (excl. dividends), $m  
  2
  31
  46
  65
  90
  122
  160
  205
  257
  316
  382
  455
  533
  618
  708
  802
  901
  1,004
  1,111
  1,221
  1,335
  1,453
  1,573
  1,699
  1,827
  1,959
  2,096
  2,237
  2,383
  2,534
  2,691
Total cash flow (excl. dividends), $m
  0
  25
  36
  50
  68
  90
  116
  146
  179
  216
  255
  295
  338
  381
  424
  468
  511
  553
  594
  634
  674
  712
  750
  787
  824
  861
  897
  934
  972
  1,011
  1,051
Retained Cash Flow (-), $m
  1
  -20
  -30
  -43
  -60
  -82
  -109
  -141
  -178
  -221
  -270
  -325
  -385
  -451
  -522
  -597
  -677
  -761
  -850
  -943
  -1,039
  -1,140
  -1,244
  -1,353
  -1,465
  -1,581
  -1,702
  -1,827
  -1,956
  -2,090
  -2,230
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
 
  5
  6
  7
  8
  8
  8
  5
  1
  -6
  -16
  -30
  -48
  -70
  -97
  -129
  -166
  -209
  -256
  -308
  -366
  -428
  -494
  -565
  -641
  -721
  -804
  -892
  -984
  -1,080
  -1,179
Discount rate, %
 
  8.30
  8.72
  9.15
  9.61
  10.09
  10.59
  11.12
  11.68
  12.26
  12.88
  13.52
  14.20
  14.91
  15.65
  16.43
  17.26
  18.12
  19.02
  19.97
  20.97
  22.02
  23.12
  24.28
  25.49
  26.77
  28.11
  29.51
  30.99
  32.54
  34.16
PV of cash for distribution, $m
 
  4
  5
  6
  6
  5
  4
  3
  0
  -2
  -5
  -7
  -10
  -11
  -13
  -13
  -13
  -12
  -11
  -10
  -8
  -7
  -5
  -4
  -3
  -2
  -1
  -1
  -1
  0
  0
Current shareholders' claim on cash, %
  100
  53.9
  29.9
  17.1
  10.1
  6.1
  3.8
  2.4
  1.5
  1.0
  0.7
  0.5
  0.3
  0.2
  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

Hemisphere Energy Corporation produces oil and natural gas from its Jenner and Atlee Buffalo properties in southeast Alberta. The Company's principal business is the acquisition, exploration, development and production of petroleum and natural gas interests in Canada. Its oil and gas properties are located in Alberta and British Columbia. Jenner is located approximately 100 kilometers northwest of Medicine Hat. The property has over eight oil pools and approximately 30 identified locations. There are over two, Company-owned-and-operated, oil processing and water disposal facilities in Jenner. The Company holds an interest in over 20,600 gross acres of undeveloped land in the Jenner area. Atlee Buffalo is located approximately 20 kilometers northeast of Jenner. The property has over two oil pools delineated by vertical wells and approximately 60 low risk drilling locations identified. It holds an interest in over 4,480 gross acres of undeveloped land in the Atlee Buffalo area.

FINANCIAL RATIOS  of  Hemisphere Energy Corporation (HME)

Valuation Ratios
P/E Ratio -7.4
Price to Sales 3.7
Price to Book 1
Price to Tangible Book
Price to Cash Flow 0
Price to Free Cash Flow -7.4
Growth Rates
Sales Growth Rate -33.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 0%
Cap. Spend. - 3 Yr. Gr. Rate -21.4%
Financial Strength
Quick Ratio 0
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 50%
Interest Coverage 0
Management Effectiveness
Return On Assets -7.4%
Ret/ On Assets - 3 Yr. Avg. -10%
Return On Total Capital -9%
Ret/ On T. Cap. - 3 Yr. Avg. -12.4%
Return On Equity -13.3%
Return On Equity - 3 Yr. Avg. -16.8%
Asset Turnover 0.1
Profitability Ratios
Gross Margin 33.3%
Gross Margin - 3 Yr. Avg. 51.1%
EBITDA Margin 0%
EBITDA Margin - 3 Yr. Avg. -0.3%
Operating Margin -33.3%
Oper. Margin - 3 Yr. Avg. -35.7%
Pre-Tax Margin -50%
Pre-Tax Margin - 3 Yr. Avg. -47.4%
Net Profit Margin -50%
Net Profit Margin - 3 Yr. Avg. -51.1%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. -4.8%
Payout Ratio 0%

HME stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the HME stock intrinsic value calculation we used $6 million for the last fiscal year's total revenue generated by Hemisphere Energy Corporation. The default revenue input number comes from 2016 income statement of Hemisphere Energy 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 HME stock valuation model: a) initial revenue growth rate of 60% 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 8.3%, whose default value for HME is calculated based on our internal credit rating of Hemisphere Energy 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 Hemisphere Energy 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 HME stock the variable cost ratio is equal to 166.7%.

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 HME 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 3.5% for Hemisphere Energy Corporation.

Corporate tax rate of 27% is the nominal tax rate for Hemisphere Energy 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 HME 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 HME are equal to 0%.

Life of production assets of 0 years is the average useful life of capital assets used in Hemisphere Energy 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 HME is equal to -16.7%. 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 - $22 million for Hemisphere Energy 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 89.778 million for Hemisphere Energy 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 Hemisphere Energy Corporation at the current share price and the inputted number of shares is $0.0 billion.

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Financial statements of HME
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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