Intrinsic value of Traverse Energy Ltd - TVL

Previous Close

$0.43

  Intrinsic Value

$0.09

stock screener

  Rating & Target

str. sell

-80%

  Value-price divergence*

0%

Previous close

$0.43

 
Intrinsic value

$0.09

 
Up/down potential

-80%

 
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 TVL 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, %
  -41.67
  50.00
  45.50
  41.45
  37.81
  34.52
  31.57
  28.91
  26.52
  24.37
  22.43
  20.69
  19.12
  17.71
  16.44
  15.29
  14.27
  13.34
  12.50
  11.75
  11.08
  10.47
  9.92
  9.43
  8.99
  8.59
  8.23
  7.91
  7.62
  7.36
  7.12
Revenue, $m
  7
  11
  15
  22
  30
  40
  53
  68
  86
  107
  131
  158
  188
  222
  258
  297
  340
  385
  433
  484
  538
  594
  653
  715
  779
  846
  916
  988
  1,063
  1,141
  1,223
Variable operating expenses, $m
 
  9
  13
  19
  26
  34
  45
  58
  74
  92
  112
  135
  161
  190
  221
  255
  291
  330
  371
  415
  461
  509
  560
  613
  668
  725
  785
  847
  911
  978
  1,048
Fixed operating expenses, $m
 
  5
  5
  5
  6
  6
  6
  6
  6
  6
  6
  7
  7
  7
  7
  7
  7
  8
  8
  8
  8
  8
  9
  9
  9
  9
  10
  10
  10
  10
  10
Total operating expenses, $m
  11
  14
  18
  24
  32
  40
  51
  64
  80
  98
  118
  142
  168
  197
  228
  262
  298
  338
  379
  423
  469
  517
  569
  622
  677
  734
  795
  857
  921
  988
  1,058
Operating income, $m
  -4
  -4
  -3
  -2
  -1
  0
  2
  4
  6
  9
  12
  16
  20
  25
  30
  35
  41
  47
  54
  61
  69
  77
  85
  93
  102
  112
  121
  132
  142
  153
  164
EBITDA, $m
  0
  2
  6
  10
  16
  23
  32
  43
  55
  70
  87
  106
  128
  151
  177
  205
  235
  268
  302
  338
  376
  416
  458
  502
  548
  595
  645
  696
  750
  805
  863
Interest expense (income), $m
  0
  0
  0
  0
  1
  1
  2
  2
  3
  4
  5
  6
  8
  9
  11
  13
  15
  17
  19
  21
  24
  27
  29
  32
  35
  39
  42
  45
  49
  53
  57
Earnings before tax, $m
  -4
  -4
  -3
  -3
  -2
  -1
  0
  1
  3
  5
  7
  10
  13
  16
  19
  23
  27
  31
  35
  40
  45
  50
  55
  61
  67
  73
  79
  86
  93
  100
  108
Tax expense, $m
  -1
  0
  0
  0
  0
  0
  0
  0
  1
  1
  2
  3
  3
  4
  5
  6
  7
  8
  10
  11
  12
  14
  15
  16
  18
  20
  21
  23
  25
  27
  29
Net income, $m
  -3
  -4
  -3
  -3
  -2
  -1
  0
  1
  2
  4
  5
  7
  9
  11
  14
  17
  19
  22
  26
  29
  33
  37
  40
  45
  49
  53
  58
  63
  68
  73
  79

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $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
Total assets, $m
  42
  59
  85
  121
  166
  224
  294
  380
  480
  597
  731
  883
  1,051
  1,238
  1,441
  1,662
  1,899
  2,152
  2,421
  2,705
  3,005
  3,320
  3,649
  3,993
  4,352
  4,726
  5,115
  5,520
  5,940
  6,377
  6,831
Adjusted assets (=assets-cash), $m
  39
  59
  85
  121
  166
  224
  294
  380
  480
  597
  731
  883
  1,051
  1,238
  1,441
  1,662
  1,899
  2,152
  2,421
  2,705
  3,005
  3,320
  3,649
  3,993
  4,352
  4,726
  5,115
  5,520
  5,940
  6,377
  6,831
Revenue / Adjusted assets
  0.179
  0.186
  0.176
  0.182
  0.181
  0.179
  0.180
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
Average production assets, $m
  32
  48
  70
  99
  136
  183
  241
  311
  393
  489
  598
  722
  860
  1,013
  1,179
  1,359
  1,553
  1,761
  1,981
  2,214
  2,459
  2,716
  2,986
  3,267
  3,561
  3,867
  4,185
  4,516
  4,860
  5,218
  5,589
Working capital, $m
  2
  -2
  -2
  -3
  -4
  -6
  -8
  -10
  -12
  -15
  -19
  -23
  -27
  -32
  -37
  -43
  -49
  -55
  -62
  -69
  -77
  -85
  -93
  -102
  -111
  -121
  -131
  -141
  -152
  -163
  -175
Total debt, $m
  0
  5
  12
  21
  33
  47
  65
  87
  113
  143
  177
  216
  259
  307
  359
  415
  476
  541
  610
  683
  759
  840
  924
  1,012
  1,104
  1,200
  1,299
  1,403
  1,511
  1,623
  1,739
Total liabilities, $m
  9
  15
  22
  31
  43
  57
  75
  97
  123
  153
  187
  226
  269
  317
  369
  425
  486
  551
  620
  693
  769
  850
  934
  1,022
  1,114
  1,210
  1,309
  1,413
  1,521
  1,633
  1,749
Total equity, $m
  32
  44
  63
  90
  124
  167
  219
  282
  357
  444
  544
  657
  782
  921
  1,072
  1,236
  1,413
  1,601
  1,801
  2,013
  2,236
  2,470
  2,715
  2,971
  3,238
  3,516
  3,806
  4,107
  4,419
  4,744
  5,082
Total liabilities and equity, $m
  41
  59
  85
  121
  167
  224
  294
  379
  480
  597
  731
  883
  1,051
  1,238
  1,441
  1,661
  1,899
  2,152
  2,421
  2,706
  3,005
  3,320
  3,649
  3,993
  4,352
  4,726
  5,115
  5,520
  5,940
  6,377
  6,831
Debt-to-equity ratio
  0.000
  0.110
  0.190
  0.230
  0.260
  0.280
  0.300
  0.310
  0.320
  0.320
  0.330
  0.330
  0.330
  0.330
  0.330
  0.340
  0.340
  0.340
  0.340
  0.340
  0.340
  0.340
  0.340
  0.340
  0.340
  0.340
  0.340
  0.340
  0.340
  0.340
  0.340
Adjusted equity ratio
  0.744
  0.744
  0.744
  0.744
  0.744
  0.744
  0.744
  0.744
  0.744
  0.744
  0.744
  0.744
  0.744
  0.744
  0.744
  0.744
  0.744
  0.744
  0.744
  0.744
  0.744
  0.744
  0.744
  0.744
  0.744
  0.744
  0.744
  0.744
  0.744
  0.744
  0.744

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -3
  -4
  -3
  -3
  -2
  -1
  0
  1
  2
  4
  5
  7
  9
  11
  14
  17
  19
  22
  26
  29
  33
  37
  40
  45
  49
  53
  58
  63
  68
  73
  79
Depreciation, amort., depletion, $m
  4
  6
  9
  12
  17
  23
  30
  39
  49
  61
  75
  90
  108
  127
  147
  170
  194
  220
  248
  277
  307
  340
  373
  408
  445
  483
  523
  565
  608
  652
  699
Funds from operations, $m
  3
  2
  5
  10
  15
  22
  30
  40
  51
  65
  80
  97
  117
  138
  161
  187
  214
  243
  273
  306
  340
  376
  414
  453
  494
  537
  581
  627
  675
  725
  777
Change in working capital, $m
  1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -3
  -3
  -3
  -4
  -4
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -10
  -11
  -11
  -12
Cash from operations, $m
  2
  3
  6
  11
  16
  23
  32
  42
  54
  68
  84
  101
  121
  143
  167
  192
  220
  249
  280
  313
  348
  384
  422
  462
  503
  546
  591
  638
  686
  736
  789
Maintenance CAPEX, $m
  0
  -4
  -6
  -9
  -12
  -17
  -23
  -30
  -39
  -49
  -61
  -75
  -90
  -108
  -127
  -147
  -170
  -194
  -220
  -248
  -277
  -307
  -340
  -373
  -408
  -445
  -483
  -523
  -565
  -608
  -652
New CAPEX, $m
  -7
  -16
  -22
  -29
  -37
  -47
  -58
  -70
  -82
  -96
  -110
  -124
  -138
  -152
  -166
  -180
  -194
  -207
  -220
  -233
  -245
  -257
  -270
  -282
  -294
  -306
  -318
  -331
  -344
  -357
  -371
Cash from investing activities, $m
  -6
  -20
  -28
  -38
  -49
  -64
  -81
  -100
  -121
  -145
  -171
  -199
  -228
  -260
  -293
  -327
  -364
  -401
  -440
  -481
  -522
  -564
  -610
  -655
  -702
  -751
  -801
  -854
  -909
  -965
  -1,023
Free cash flow, $m
  -4
  -17
  -22
  -27
  -33
  -41
  -49
  -58
  -67
  -77
  -87
  -97
  -107
  -117
  -127
  -136
  -144
  -152
  -160
  -167
  -174
  -181
  -187
  -193
  -199
  -205
  -211
  -216
  -222
  -229
  -235
Issuance/(repayment) of debt, $m
  0
  5
  7
  9
  12
  15
  18
  22
  26
  30
  34
  39
  43
  48
  52
  56
  61
  65
  69
  73
  77
  81
  84
  88
  92
  96
  100
  104
  108
  112
  116
Issuance/(repurchase) of shares, $m
  6
  18
  23
  29
  36
  44
  53
  62
  73
  83
  94
  105
  116
  127
  137
  147
  157
  166
  174
  183
  190
  198
  205
  212
  218
  225
  231
  238
  245
  252
  259
Cash from financing (excl. dividends), $m  
  6
  23
  30
  38
  48
  59
  71
  84
  99
  113
  128
  144
  159
  175
  189
  203
  218
  231
  243
  256
  267
  279
  289
  300
  310
  321
  331
  342
  353
  364
  375
Total cash flow (excl. dividends), $m
  2
  6
  8
  11
  14
  18
  22
  26
  31
  36
  41
  47
  52
  58
  63
  68
  73
  78
  83
  88
  93
  97
  102
  107
  111
  116
  120
  125
  130
  135
  141
Retained Cash Flow (-), $m
  -2
  -18
  -23
  -29
  -36
  -44
  -53
  -63
  -75
  -87
  -100
  -113
  -126
  -139
  -151
  -164
  -176
  -188
  -200
  -212
  -223
  -234
  -245
  -256
  -267
  -278
  -289
  -301
  -313
  -325
  -338
Prev. year cash balance distribution, $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
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
 
  -9
  -15
  -18
  -22
  -26
  -31
  -37
  -44
  -51
  -58
  -66
  -73
  -81
  -88
  -96
  -103
  -110
  -117
  -124
  -130
  -137
  -143
  -149
  -156
  -162
  -169
  -176
  -183
  -190
  -197
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
 
  -9
  -14
  -16
  -18
  -20
  -22
  -25
  -27
  -29
  -31
  -31
  -31
  -31
  -30
  -28
  -26
  -24
  -22
  -19
  -17
  -14
  -12
  -10
  -8
  -6
  -5
  -4
  -3
  -2
  -1
Current shareholders' claim on cash, %
  100
  66.2
  46.3
  33.7
  25.5
  19.8
  15.8
  12.8
  10.6
  8.9
  7.6
  6.6
  5.7
  5.1
  4.5
  4.1
  3.7
  3.4
  3.1
  2.9
  2.7
  2.5
  2.3
  2.2
  2.1
  1.9
  1.9
  1.8
  1.7
  1.6
  1.5

Traverse Energy Ltd. is an oil and gas exploration, development and production company. The Company conducts its operations in the province of Alberta. The Company's production consists of natural gas, oil and natural gas liquids. Its principal oil and natural gas properties are located in the areas of Coyote, Michichi and Turin in the province of Alberta. In the Coyote area, located approximately 40 kilometers east of Drumheller in East Central Alberta, the Company holds a working interest in over 35,240 net acres. The Company holds a working interest in over 29,760 net acres in the Michichi area, located approximately 20 kilometers west of the Coyote property. In the Turin area, located approximately 20 kilometers northeast of Lethbridge in Southern Alberta, the Company holds an interest in over 5,680 net acres. The Company holds various minor over-riding royalty (ORR) interests in producing oil and natural gas wells, all located within the province of Alberta.

FINANCIAL RATIOS  of  Traverse Energy Ltd (TVL)

Valuation Ratios
P/E Ratio -12.4
Price to Sales 5.3
Price to Book 1.2
Price to Tangible Book
Price to Cash Flow 18.6
Price to Free Cash Flow -7.5
Growth Rates
Sales Growth Rate -41.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -36.4%
Cap. Spend. - 3 Yr. Gr. Rate -14.1%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets -7.4%
Ret/ On Assets - 3 Yr. Avg. -9.3%
Return On Total Capital -9.7%
Ret/ On T. Cap. - 3 Yr. Avg. -12.4%
Return On Equity -9.7%
Return On Equity - 3 Yr. Avg. -12.5%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 42.9%
Gross Margin - 3 Yr. Avg. 62%
EBITDA Margin 0%
EBITDA Margin - 3 Yr. Avg. 15%
Operating Margin -57.1%
Oper. Margin - 3 Yr. Avg. -37.2%
Pre-Tax Margin -57.1%
Pre-Tax Margin - 3 Yr. Avg. -37.2%
Net Profit Margin -42.9%
Net Profit Margin - 3 Yr. Avg. -32.4%
Effective Tax Rate 25%
Eff/ Tax Rate - 3 Yr. Avg. 8.3%
Payout Ratio 0%

TVL stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the TVL stock intrinsic value calculation we used $7 million for the last fiscal year's total revenue generated by Traverse Energy Ltd. The default revenue input number comes from 2016 income statement of Traverse Energy 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 TVL stock valuation model: a) initial revenue growth rate of 50% 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 TVL is calculated based on our internal credit rating of Traverse Energy 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 Traverse Energy 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 TVL stock the variable cost ratio is equal to 85.7%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $5 million in the base year in the intrinsic value calculation for TVL 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 Traverse Energy Ltd.

Corporate tax rate of 27% is the nominal tax rate for Traverse Energy 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 TVL 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 TVL are equal to 457.1%.

Life of production assets of 8 years is the average useful life of capital assets used in Traverse Energy 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 TVL is equal to -14.3%. 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 - $32 million for Traverse Energy 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 91.658 million for Traverse Energy 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 Traverse Energy Ltd at the current share price and the inputted number of shares is $0.0 billion.

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Financial statements of TVL
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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