Intrinsic value of Whitecap Resources Inc. - WCP

Previous Close

$8.94

  Intrinsic Value

$2.03

stock screener

  Rating & Target

str. sell

-77%

Previous close

$8.94

 
Intrinsic value

$2.03

 
Up/down potential

-77%

 
Rating

str. sell

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

We calculate the intrinsic value of WCP 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 3.3

 

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, %
  11.20
  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
  536
  858
  1,325
  1,982
  2,875
  4,056
  5,577
  7,485
  9,829
  12,647
  15,974
  19,837
  24,252
  29,232
  34,780
  40,895
  47,571
  54,798
  62,564
  70,857
  79,665
  88,975
  98,778
  109,067
  119,837
  131,086
  142,817
  155,033
  167,742
  180,958
  194,694
Variable operating expenses, $m
 
  1,932
  2,978
  4,447
  6,447
  9,091
  12,493
  16,765
  22,010
  28,317
  35,764
  44,395
  54,278
  65,423
  77,840
  91,526
  106,467
  122,641
  140,022
  158,582
  178,294
  199,130
  221,071
  244,098
  268,202
  293,378
  319,631
  346,971
  375,416
  404,993
  435,734
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
  296
  1,932
  2,978
  4,447
  6,447
  9,091
  12,493
  16,765
  22,010
  28,317
  35,764
  44,395
  54,278
  65,423
  77,840
  91,526
  106,467
  122,641
  140,022
  158,582
  178,294
  199,130
  221,071
  244,098
  268,202
  293,378
  319,631
  346,971
  375,416
  404,993
  435,734
Operating income, $m
  240
  -1,074
  -1,653
  -2,466
  -3,572
  -5,034
  -6,916
  -9,280
  -12,181
  -15,670
  -19,789
  -24,559
  -30,025
  -36,191
  -43,060
  -50,631
  -58,896
  -67,843
  -77,458
  -87,725
  -98,629
  -110,156
  -122,293
  -135,031
  -148,365
  -162,292
  -176,814
  -191,938
  -207,674
  -224,035
  -241,041
EBITDA, $m
  261
  -832
  -1,286
  -1,923
  -2,791
  -3,937
  -5,413
  -7,265
  -9,540
  -12,276
  -15,505
  -19,254
  -23,540
  -28,373
  -33,758
  -39,694
  -46,174
  -53,188
  -60,726
  -68,775
  -77,324
  -86,361
  -95,876
  -105,863
  -116,316
  -127,235
  -138,620
  -150,477
  -162,814
  -175,641
  -188,973
Interest expense (income), $m
  36
  34
  87
  165
  273
  420
  615
  866
  1,181
  1,568
  2,033
  2,582
  3,219
  3,947
  4,769
  5,685
  6,694
  7,795
  8,988
  10,269
  11,637
  13,091
  14,627
  16,244
  17,942
  19,719
  21,575
  23,511
  25,526
  27,623
  29,804
Earnings before tax, $m
  240
  -1,108
  -1,740
  -2,630
  -3,845
  -5,455
  -7,532
  -10,146
  -13,362
  -17,238
  -21,822
  -27,140
  -33,244
  -40,138
  -47,829
  -56,315
  -65,589
  -75,638
  -86,445
  -97,994
  -110,266
  -123,246
  -136,919
  -151,275
  -166,307
  -182,011
  -198,389
  -215,449
  -233,200
  -251,659
  -270,845
Tax expense, $m
  69
  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
  171
  -1,108
  -1,740
  -2,630
  -3,845
  -5,455
  -7,532
  -10,146
  -13,362
  -17,238
  -21,822
  -27,140
  -33,244
  -40,138
  -47,829
  -56,315
  -65,589
  -75,638
  -86,445
  -97,994
  -110,266
  -123,246
  -136,919
  -151,275
  -166,307
  -182,011
  -198,389
  -215,449
  -233,200
  -251,659
  -270,845

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
  5,135
  8,246
  12,740
  19,053
  27,645
  39,003
  53,621
  71,974
  94,507
  121,608
  153,600
  190,737
  233,194
  281,077
  334,426
  393,226
  457,416
  526,905
  601,580
  681,320
  766,006
  855,527
  949,790
  1,048,722
  1,152,280
  1,260,446
  1,373,236
  1,490,697
  1,612,908
  1,739,980
  1,872,054
Adjusted assets (=assets-cash), $m
  5,135
  8,246
  12,740
  19,053
  27,645
  39,003
  53,621
  71,974
  94,507
  121,608
  153,600
  190,737
  233,194
  281,077
  334,426
  393,226
  457,416
  526,905
  601,580
  681,320
  766,006
  855,527
  949,790
  1,048,722
  1,152,280
  1,260,446
  1,373,236
  1,490,697
  1,612,908
  1,739,980
  1,872,054
Revenue / Adjusted assets
  0.104
  0.104
  0.104
  0.104
  0.104
  0.104
  0.104
  0.104
  0.104
  0.104
  0.104
  0.104
  0.104
  0.104
  0.104
  0.104
  0.104
  0.104
  0.104
  0.104
  0.104
  0.104
  0.104
  0.104
  0.104
  0.104
  0.104
  0.104
  0.104
  0.104
  0.104
Average production assets, $m
  4,301
  6,881
  10,630
  15,898
  23,067
  32,544
  44,741
  60,055
  78,856
  101,468
  128,163
  159,149
  194,575
  234,528
  279,042
  328,104
  381,664
  439,645
  501,953
  568,488
  639,150
  713,845
  792,497
  875,045
  961,453
  1,051,706
  1,145,817
  1,243,826
  1,345,798
  1,451,825
  1,562,027
Working capital, $m
  -120
  -192
  -297
  -444
  -644
  -909
  -1,249
  -1,677
  -2,202
  -2,833
  -3,578
  -4,443
  -5,432
  -6,548
  -7,791
  -9,161
  -10,656
  -12,275
  -14,014
  -15,872
  -17,845
  -19,930
  -22,126
  -24,431
  -26,844
  -29,363
  -31,991
  -34,727
  -37,574
  -40,535
  -43,611
Total debt, $m
  773
  1,986
  3,739
  6,201
  9,552
  13,981
  19,682
  26,840
  35,628
  46,197
  58,674
  73,157
  89,716
  108,390
  129,196
  152,128
  177,162
  204,263
  233,386
  264,485
  297,513
  332,426
  369,188
  407,772
  448,159
  490,344
  534,332
  580,142
  627,804
  677,362
  728,871
Total liabilities, $m
  2,003
  3,216
  4,969
  7,431
  10,782
  15,211
  20,912
  28,070
  36,858
  47,427
  59,904
  74,387
  90,946
  109,620
  130,426
  153,358
  178,392
  205,493
  234,616
  265,715
  298,743
  333,656
  370,418
  409,002
  449,389
  491,574
  535,562
  581,372
  629,034
  678,592
  730,101
Total equity, $m
  3,132
  5,030
  7,772
  11,622
  16,864
  23,792
  32,709
  43,904
  57,649
  74,181
  93,696
  116,349
  142,248
  171,457
  204,000
  239,868
  279,024
  321,412
  366,964
  415,606
  467,264
  521,872
  579,372
  639,721
  702,891
  768,872
  837,674
  909,325
  983,874
  1,061,388
  1,141,953
Total liabilities and equity, $m
  5,135
  8,246
  12,741
  19,053
  27,646
  39,003
  53,621
  71,974
  94,507
  121,608
  153,600
  190,736
  233,194
  281,077
  334,426
  393,226
  457,416
  526,905
  601,580
  681,321
  766,007
  855,528
  949,790
  1,048,723
  1,152,280
  1,260,446
  1,373,236
  1,490,697
  1,612,908
  1,739,980
  1,872,054
Debt-to-equity ratio
  0.247
  0.390
  0.480
  0.530
  0.570
  0.590
  0.600
  0.610
  0.620
  0.620
  0.630
  0.630
  0.630
  0.630
  0.630
  0.630
  0.630
  0.640
  0.640
  0.640
  0.640
  0.640
  0.640
  0.640
  0.640
  0.640
  0.640
  0.640
  0.640
  0.640
  0.640
Adjusted equity ratio
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  171
  -1,108
  -1,740
  -2,630
  -3,845
  -5,455
  -7,532
  -10,146
  -13,362
  -17,238
  -21,822
  -27,140
  -33,244
  -40,138
  -47,829
  -56,315
  -65,589
  -75,638
  -86,445
  -97,994
  -110,266
  -123,246
  -136,919
  -151,275
  -166,307
  -182,011
  -198,389
  -215,449
  -233,200
  -251,659
  -270,845
Depreciation, amort., depletion, $m
  21
  242
  367
  542
  781
  1,097
  1,504
  2,014
  2,641
  3,395
  4,284
  5,305
  6,486
  7,818
  9,301
  10,937
  12,722
  14,655
  16,732
  18,950
  21,305
  23,795
  26,417
  29,168
  32,048
  35,057
  38,194
  41,461
  44,860
  48,394
  52,068
Funds from operations, $m
  350
  -866
  -1,373
  -2,088
  -3,063
  -4,357
  -6,028
  -8,131
  -10,721
  -13,843
  -17,538
  -21,835
  -26,759
  -32,321
  -38,528
  -45,379
  -52,867
  -60,983
  -69,714
  -79,044
  -88,961
  -99,451
  -110,503
  -122,107
  -134,258
  -146,954
  -160,196
  -173,988
  -188,340
  -203,265
  -218,777
Change in working capital, $m
  -15
  -72
  -105
  -147
  -200
  -265
  -341
  -428
  -525
  -631
  -745
  -865
  -989
  -1,115
  -1,243
  -1,370
  -1,495
  -1,619
  -1,740
  -1,858
  -1,973
  -2,085
  -2,196
  -2,305
  -2,412
  -2,520
  -2,628
  -2,736
  -2,847
  -2,960
  -3,077
Cash from operations, $m
  365
  -794
  -1,269
  -1,941
  -2,863
  -4,093
  -5,687
  -7,704
  -10,196
  -13,212
  -16,792
  -20,970
  -25,769
  -31,205
  -37,285
  -44,009
  -51,372
  -59,364
  -67,974
  -77,187
  -86,989
  -97,366
  -108,307
  -119,802
  -131,846
  -144,434
  -157,568
  -171,252
  -185,493
  -200,304
  -215,700
Maintenance CAPEX, $m
  0
  -143
  -229
  -354
  -530
  -769
  -1,085
  -1,491
  -2,002
  -2,629
  -3,382
  -4,272
  -5,305
  -6,486
  -7,818
  -9,301
  -10,937
  -12,722
  -14,655
  -16,732
  -18,950
  -21,305
  -23,795
  -26,417
  -29,168
  -32,048
  -35,057
  -38,194
  -41,461
  -44,860
  -48,394
New CAPEX, $m
  -787
  -2,580
  -3,750
  -5,267
  -7,169
  -9,477
  -12,197
  -15,314
  -18,801
  -22,612
  -26,694
  -30,986
  -35,426
  -39,953
  -44,514
  -49,062
  -53,560
  -57,981
  -62,308
  -66,535
  -70,661
  -74,696
  -78,652
  -82,548
  -86,407
  -90,253
  -94,111
  -98,009
  -101,972
  -106,027
  -110,202
Cash from investing activities, $m
  -675
  -2,723
  -3,979
  -5,621
  -7,699
  -10,246
  -13,282
  -16,805
  -20,803
  -25,241
  -30,076
  -35,258
  -40,731
  -46,439
  -52,332
  -58,363
  -64,497
  -70,703
  -76,963
  -83,267
  -89,611
  -96,001
  -102,447
  -108,965
  -115,575
  -122,301
  -129,168
  -136,203
  -143,433
  -150,887
  -158,596
Free cash flow, $m
  -310
  -3,518
  -5,248
  -7,562
  -10,562
  -14,339
  -18,969
  -24,510
  -30,999
  -38,453
  -46,869
  -56,229
  -66,500
  -77,644
  -89,616
  -102,372
  -115,868
  -130,067
  -144,937
  -160,454
  -176,599
  -193,366
  -210,753
  -228,767
  -247,421
  -266,736
  -286,736
  -307,454
  -328,926
  -351,192
  -374,296
Issuance/(repayment) of debt, $m
  -103
  1,213
  1,753
  2,462
  3,351
  4,430
  5,701
  7,158
  8,788
  10,569
  12,477
  14,483
  16,558
  18,674
  20,806
  22,932
  25,034
  27,101
  29,123
  31,099
  33,028
  34,913
  36,762
  38,584
  40,387
  42,185
  43,988
  45,810
  47,662
  49,558
  51,509
Issuance/(repurchase) of shares, $m
  539
  3,006
  4,482
  6,481
  9,086
  12,383
  16,448
  21,341
  27,107
  33,769
  41,338
  49,794
  59,143
  69,347
  80,372
  92,183
  104,745
  118,026
  131,997
  146,636
  161,925
  177,854
  194,419
  211,624
  229,476
  247,992
  267,192
  287,100
  307,749
  329,172
  351,410
Cash from financing (excl. dividends), $m  
  427
  4,219
  6,235
  8,943
  12,437
  16,813
  22,149
  28,499
  35,895
  44,338
  53,815
  64,277
  75,701
  88,021
  101,178
  115,115
  129,779
  145,127
  161,120
  177,735
  194,953
  212,767
  231,181
  250,208
  269,863
  290,177
  311,180
  332,910
  355,411
  378,730
  402,919
Total cash flow (excl. dividends), $m
  117
  701
  986
  1,380
  1,874
  2,474
  3,180
  3,990
  4,895
  5,885
  6,946
  8,048
  9,201
  10,377
  11,562
  12,743
  13,911
  15,059
  16,183
  17,281
  18,353
  19,401
  20,428
  21,440
  22,443
  23,441
  24,444
  25,456
  26,485
  27,539
  28,623
Retained Cash Flow (-), $m
  -625
  -3,006
  -4,482
  -6,481
  -9,086
  -12,383
  -16,448
  -21,341
  -27,107
  -33,769
  -41,338
  -49,794
  -59,143
  -69,347
  -80,372
  -92,183
  -104,745
  -118,026
  -131,997
  -146,636
  -161,925
  -177,854
  -194,419
  -211,624
  -229,476
  -247,992
  -267,192
  -287,100
  -307,749
  -329,172
  -351,410
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
 
  -2,305
  -3,495
  -5,100
  -7,211
  -9,909
  -13,268
  -17,352
  -22,211
  -27,884
  -34,392
  -41,746
  -49,942
  -58,970
  -68,810
  -79,440
  -90,834
  -102,967
  -115,814
  -129,355
  -143,572
  -158,453
  -173,991
  -190,183
  -207,034
  -224,551
  -242,748
  -261,644
  -281,264
  -301,634
  -322,787
Discount rate, %
 
  4.50
  4.73
  4.96
  5.21
  5.47
  5.74
  6.03
  6.33
  6.65
  6.98
  7.33
  7.70
  8.08
  8.49
  8.91
  9.36
  9.82
  10.31
  10.83
  11.37
  11.94
  12.54
  13.16
  13.82
  14.51
  15.24
  16.00
  16.80
  17.64
  18.52
PV of cash for distribution, $m
 
  -2,206
  -3,187
  -4,411
  -5,886
  -7,593
  -9,490
  -11,517
  -13,591
  -15,623
  -17,514
  -19,172
  -20,514
  -21,472
  -22,002
  -22,082
  -21,718
  -20,937
  -19,788
  -18,336
  -16,657
  -14,833
  -12,943
  -11,064
  -9,260
  -7,585
  -6,076
  -4,757
  -3,636
  -2,712
  -1,972
Current shareholders' claim on cash, %
  100
  52.4
  28.4
  15.9
  9.1
  5.4
  3.3
  2.0
  1.3
  0.8
  0.5
  0.4
  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
  0.0

Whitecap Resources Inc is a Canada-based oil-weighted growth company focused on its existing assets enhanced by oil-based acquisitions. Its assets include Boundary Lake property, which is located in northeast British Columbia; Valhalla North property, which is located in the Peace River Arch area of Alberta and is characterized by shallow declines and a production base, and Deep Basin properties, which include Karr, Simonette, Kakwa, Elmworth and Wapiti, which are located southwest of Grande Prairie, Alberta. The primary reservoirs being developed are the Dunvegan and Cardium. Its Cardium producing areas are primarily located in the Pembina, Garrington, Ferrier and Willesden Green areas of West Central Alberta. Its Elnora producing property is located southeast of Red Deer, Alberta. Its Lucky Hills, Whiteside, Kerrobert, and Eagle Lake areas are located in West Central Saskatchewan. The primary reservoir that the Company is focused on developing is the Viking resource oil play.

FINANCIAL RATIOS  of  Whitecap Resources Inc. (WCP)

Valuation Ratios
P/E Ratio 19.3
Price to Sales 6.1
Price to Book 1.1
Price to Tangible Book
Price to Cash Flow 9
Price to Free Cash Flow -7.8
Growth Rates
Sales Growth Rate 11.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 65.7%
Cap. Spend. - 3 Yr. Gr. Rate 6.6%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 24.7%
Total Debt to Equity 24.7%
Interest Coverage 8
Management Effectiveness
Return On Assets 4.2%
Ret/ On Assets - 3 Yr. Avg. 2.8%
Return On Total Capital 4.7%
Ret/ On T. Cap. - 3 Yr. Avg. 2.7%
Return On Equity 6.1%
Return On Equity - 3 Yr. Avg. 3.3%
Asset Turnover 0.1
Profitability Ratios
Gross Margin 70.1%
Gross Margin - 3 Yr. Avg. 75.7%
EBITDA Margin 55.4%
EBITDA Margin - 3 Yr. Avg. 62.6%
Operating Margin 44.8%
Oper. Margin - 3 Yr. Avg. -9.5%
Pre-Tax Margin 44.8%
Pre-Tax Margin - 3 Yr. Avg. -9.5%
Net Profit Margin 31.9%
Net Profit Margin - 3 Yr. Avg. -9.5%
Effective Tax Rate 28.8%
Eff/ Tax Rate - 3 Yr. Avg. 21.4%
Payout Ratio 68.4%

WCP stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the WCP stock intrinsic value calculation we used $536 million for the last fiscal year's total revenue generated by Whitecap Resources Inc.. The default revenue input number comes from 2016 income statement of Whitecap Resources Inc.. 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 WCP 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 4.5%, whose default value for WCP is calculated based on our internal credit rating of Whitecap Resources Inc., 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 Whitecap Resources Inc..
    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 WCP stock the variable cost ratio is equal to 226.1%.

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 WCP 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 4.4% for Whitecap Resources Inc..

Corporate tax rate of 27% is the nominal tax rate for Whitecap Resources Inc.. 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 WCP 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 WCP are equal to 802.3%.

Life of production assets of 210.6 years is the average useful life of capital assets used in Whitecap Resources Inc. 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 WCP is equal to -22.4%. 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 - $3132 million for Whitecap Resources Inc. - 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 370.246 million for Whitecap Resources Inc. 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 Whitecap Resources Inc. at the current share price and the inputted number of shares is $3.3 billion.

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Financial statements of WCP
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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