Intrinsic value of Badger Daylighting Ltd. - BAD

Previous Close

$26.34

  Intrinsic Value

$1.87

stock screener

  Rating & Target

str. sell

-93%

  Value-price divergence*

-15%

Previous close

$26.34

 
Intrinsic value

$1.87

 
Up/down potential

-93%

 
Rating

str. sell

 
Value-price divergence*

-15%

*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 1.0

 

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, %
  -0.25
  15.90
  14.81
  13.83
  12.95
  12.15
  11.44
  10.79
  10.21
  9.69
  9.22
  8.80
  8.42
  8.08
  7.77
  7.49
  7.24
  7.02
  6.82
  6.64
  6.47
  6.33
  6.19
  6.07
  5.97
  5.87
  5.78
  5.70
  5.63
  5.57
  5.51
Revenue, $m
  404
  468
  538
  612
  691
  775
  864
  957
  1,055
  1,157
  1,264
  1,375
  1,491
  1,611
  1,736
  1,866
  2,002
  2,142
  2,288
  2,440
  2,598
  2,762
  2,933
  3,111
  3,297
  3,491
  3,692
  3,903
  4,123
  4,353
  4,593
Variable operating expenses, $m
 
  414
  475
  541
  611
  685
  763
  846
  932
  1,022
  1,117
  1,215
  1,317
  1,423
  1,534
  1,649
  1,768
  1,893
  2,022
  2,156
  2,295
  2,440
  2,592
  2,749
  2,913
  3,084
  3,262
  3,448
  3,643
  3,846
  4,058
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
  414
  475
  541
  611
  685
  763
  846
  932
  1,022
  1,117
  1,215
  1,317
  1,423
  1,534
  1,649
  1,768
  1,893
  2,022
  2,156
  2,295
  2,440
  2,592
  2,749
  2,913
  3,084
  3,262
  3,448
  3,643
  3,846
  4,058
Operating income, $m
  54
  54
  62
  71
  80
  90
  100
  111
  123
  135
  147
  160
  174
  188
  202
  217
  233
  250
  267
  284
  303
  322
  342
  362
  384
  407
  430
  455
  480
  507
  535
EBITDA, $m
  97
  104
  119
  136
  153
  172
  191
  212
  234
  256
  280
  305
  330
  357
  385
  414
  444
  475
  507
  541
  576
  612
  650
  690
  731
  774
  818
  865
  914
  965
  1,018
Interest expense (income), $m
  5
  5
  6
  8
  9
  11
  13
  15
  17
  19
  21
  24
  26
  29
  31
  34
  37
  40
  43
  46
  49
  53
  56
  60
  64
  68
  72
  76
  81
  86
  91
Earnings before tax, $m
  47
  49
  56
  63
  71
  79
  87
  96
  106
  116
  126
  137
  148
  159
  171
  184
  197
  210
  224
  238
  254
  269
  286
  303
  320
  339
  358
  378
  399
  421
  444
Tax expense, $m
  18
  13
  15
  17
  19
  21
  24
  26
  29
  31
  34
  37
  40
  43
  46
  50
  53
  57
  60
  64
  68
  73
  77
  82
  87
  92
  97
  102
  108
  114
  120
Net income, $m
  29
  36
  41
  46
  52
  58
  64
  70
  77
  84
  92
  100
  108
  116
  125
  134
  143
  153
  163
  174
  185
  197
  208
  221
  234
  247
  262
  276
  292
  308
  324

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
  458
  525
  598
  676
  758
  844
  935
  1,031
  1,131
  1,235
  1,344
  1,457
  1,575
  1,697
  1,824
  1,957
  2,094
  2,237
  2,385
  2,539
  2,700
  2,867
  3,041
  3,223
  3,412
  3,609
  3,815
  4,030
  4,255
  4,489
Adjusted assets (=assets-cash), $m
  395
  458
  525
  598
  676
  758
  844
  935
  1,031
  1,131
  1,235
  1,344
  1,457
  1,575
  1,697
  1,824
  1,957
  2,094
  2,237
  2,385
  2,539
  2,700
  2,867
  3,041
  3,223
  3,412
  3,609
  3,815
  4,030
  4,255
  4,489
Revenue / Adjusted assets
  1.023
  1.022
  1.025
  1.023
  1.022
  1.022
  1.024
  1.024
  1.023
  1.023
  1.023
  1.023
  1.023
  1.023
  1.023
  1.023
  1.023
  1.023
  1.023
  1.023
  1.023
  1.023
  1.023
  1.023
  1.023
  1.023
  1.023
  1.023
  1.023
  1.023
  1.023
Average production assets, $m
  306
  354
  407
  463
  523
  587
  654
  724
  798
  876
  957
  1,041
  1,128
  1,220
  1,314
  1,413
  1,515
  1,622
  1,732
  1,847
  1,967
  2,091
  2,220
  2,355
  2,496
  2,642
  2,795
  2,955
  3,121
  3,295
  3,477
Working capital, $m
  121
  67
  77
  88
  100
  112
  124
  138
  152
  167
  182
  198
  215
  232
  250
  269
  288
  308
  329
  351
  374
  398
  422
  448
  475
  503
  532
  562
  594
  627
  661
Total debt, $m
  101
  129
  160
  193
  228
  265
  304
  346
  389
  434
  482
  531
  582
  635
  691
  748
  808
  871
  935
  1,002
  1,072
  1,145
  1,221
  1,300
  1,382
  1,468
  1,557
  1,650
  1,748
  1,849
  1,956
Total liabilities, $m
  179
  207
  238
  271
  306
  343
  382
  424
  467
  512
  560
  609
  660
  713
  769
  826
  886
  949
  1,013
  1,080
  1,150
  1,223
  1,299
  1,378
  1,460
  1,546
  1,635
  1,728
  1,826
  1,927
  2,034
Total equity, $m
  279
  250
  287
  327
  370
  414
  462
  512
  564
  619
  676
  735
  797
  861
  928
  998
  1,070
  1,145
  1,223
  1,305
  1,389
  1,477
  1,568
  1,664
  1,763
  1,866
  1,974
  2,087
  2,205
  2,327
  2,456
Total liabilities and equity, $m
  458
  457
  525
  598
  676
  757
  844
  936
  1,031
  1,131
  1,236
  1,344
  1,457
  1,574
  1,697
  1,824
  1,956
  2,094
  2,236
  2,385
  2,539
  2,700
  2,867
  3,042
  3,223
  3,412
  3,609
  3,815
  4,031
  4,254
  4,490
Debt-to-equity ratio
  0.362
  0.520
  0.560
  0.590
  0.620
  0.640
  0.660
  0.680
  0.690
  0.700
  0.710
  0.720
  0.730
  0.740
  0.740
  0.750
  0.760
  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
  0.800
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
  36
  41
  46
  52
  58
  64
  70
  77
  84
  92
  100
  108
  116
  125
  134
  143
  153
  163
  174
  185
  197
  208
  221
  234
  247
  262
  276
  292
  308
  324
Depreciation, amort., depletion, $m
  43
  49
  57
  65
  73
  82
  91
  101
  111
  122
  133
  145
  157
  169
  183
  196
  210
  225
  241
  257
  273
  290
  308
  327
  347
  367
  388
  410
  433
  458
  483
Funds from operations, $m
  56
  85
  98
  111
  125
  139
  155
  171
  188
  206
  225
  244
  265
  286
  307
  330
  354
  378
  404
  431
  458
  487
  517
  548
  581
  614
  650
  687
  725
  765
  807
Change in working capital, $m
  -23
  9
  10
  11
  11
  12
  13
  13
  14
  15
  15
  16
  17
  17
  18
  19
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  30
  32
  33
  35
Cash from operations, $m
  79
  76
  88
  100
  113
  127
  142
  158
  174
  191
  209
  228
  248
  268
  289
  312
  334
  358
  383
  409
  435
  463
  492
  522
  554
  587
  621
  656
  693
  732
  773
Maintenance CAPEX, $m
  0
  -43
  -49
  -57
  -64
  -73
  -81
  -91
  -101
  -111
  -122
  -133
  -145
  -157
  -169
  -183
  -196
  -210
  -225
  -241
  -257
  -273
  -290
  -308
  -327
  -347
  -367
  -388
  -410
  -433
  -458
New CAPEX, $m
  -23
  -48
  -52
  -56
  -60
  -64
  -67
  -71
  -74
  -77
  -81
  -84
  -88
  -91
  -95
  -98
  -102
  -106
  -111
  -115
  -120
  -124
  -129
  -135
  -141
  -146
  -153
  -159
  -166
  -174
  -182
Cash from investing activities, $m
  -22
  -91
  -101
  -113
  -124
  -137
  -148
  -162
  -175
  -188
  -203
  -217
  -233
  -248
  -264
  -281
  -298
  -316
  -336
  -356
  -377
  -397
  -419
  -443
  -468
  -493
  -520
  -547
  -576
  -607
  -640
Free cash flow, $m
  57
  -15
  -14
  -13
  -11
  -9
  -7
  -4
  0
  3
  7
  11
  16
  20
  25
  30
  36
  41
  47
  53
  59
  66
  72
  79
  86
  93
  101
  109
  117
  125
  133
Issuance/(repayment) of debt, $m
  0
  28
  31
  33
  35
  37
  39
  41
  43
  45
  47
  49
  51
  53
  55
  58
  60
  62
  65
  67
  70
  73
  76
  79
  82
  86
  89
  93
  97
  102
  106
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
  28
  31
  33
  35
  37
  39
  41
  43
  45
  47
  49
  51
  53
  55
  58
  60
  62
  65
  67
  70
  73
  76
  79
  82
  86
  89
  93
  97
  102
  106
Total cash flow (excl. dividends), $m
  52
  14
  17
  20
  24
  28
  33
  38
  43
  48
  54
  60
  67
  74
  81
  88
  96
  104
  112
  120
  129
  139
  148
  158
  168
  179
  190
  202
  214
  227
  240
Retained Cash Flow (-), $m
  -11
  -34
  -37
  -40
  -42
  -45
  -47
  -50
  -52
  -55
  -57
  -59
  -62
  -64
  -67
  -70
  -72
  -75
  -78
  -81
  -84
  -88
  -91
  -95
  -99
  -103
  -108
  -113
  -118
  -123
  -128
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
 
  42
  -20
  -20
  -18
  -17
  -15
  -12
  -9
  -6
  -3
  1
  5
  9
  14
  19
  23
  29
  34
  39
  45
  51
  57
  63
  69
  76
  82
  89
  96
  104
  111
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
 
  41
  -19
  -17
  -15
  -13
  -11
  -8
  -6
  -4
  -1
  0
  2
  4
  5
  5
  6
  6
  6
  6
  6
  5
  5
  4
  4
  3
  2
  2
  1
  1
  1
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
  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
  100.0
  100.0

Badger Daylighting Ltd. provides non-destructive excavating services in Canada and the United States. Its Badger Hydrovac technology uses a pressurized water stream to liquefy the soil cover, which is then removed with a vacuum system and deposited into a storage tank. The company offers daylighting services for visual confirmation of buried lines, directional drilling test holes, sacrificial anode installation, pipeline and utility crossings, and subsurface utility engineering test holes applications; and slot trenching services for perimeter slot trenching, expose existing cables or conduits, cable or conduit and drain tile installation, and line fault repairs. It also provides pole and piling holes services for utility, traffic signal, and transmission pole holes, as well as light standard and sign post holes; pole removals; end-bearing, pilot holes for friction, and spread footing piles; and well monitor installations applications. In addition, the company offers service repair pits for gas service tie-in, electric cable fault repair, water main and service repair, and telecom splice pits applications; and debris removal and tank cleanouts services, such as frac tank cleanouts, road and box culvert cleanouts, pipe-rammed casing cleanouts, ballast and filter media removal, and material removal from inside structures and buildings. Further, it designs, engineers, rents, and supplies excavation shoring systems; and provides sewer services, including flushing and cleaning, CCTV inspections, mainline to lateral inspection, locating, smoke and air testing, deflection testing, laser profiling, and reaming and concrete removal. The company serves utility, transportation, industrial, engineering, construction, and petroleum industries. As of December 31, 2015, it operated a fleet of 1,018 Badger hydrovacs, including 364 units in Canada and 654 in the United States. Badger Daylighting Ltd. was founded in 1992 and is headquartered in Calgary, Canada.

FINANCIAL RATIOS  of  Badger Daylighting Ltd. (BAD)

Valuation Ratios
P/E Ratio 33.7
Price to Sales 2.4
Price to Book 3.5
Price to Tangible Book
Price to Cash Flow 12.4
Price to Free Cash Flow 17.5
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 15.9% 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 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 36.988 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 $1.0 billion.

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Stock chart of BAD 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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