Intrinsic value of Bonavista Energy Corporation - BNP

Previous Close

$2.43

  Intrinsic Value

$1.48

stock screener

  Rating & Target

sell

-39%

Previous close

$2.43

 
Intrinsic value

$1.48

 
Up/down potential

-39%

 
Rating

sell

We calculate the intrinsic value of BNP 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 0.6

 

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, %
  -25.09
  54.80
  49.82
  45.34
  41.30
  37.67
  34.41
  31.47
  28.82
  26.44
  24.29
  22.36
  20.63
  19.06
  17.66
  16.39
  15.25
  14.23
  13.31
  12.47
  11.73
  11.05
  10.45
  9.90
  9.41
  8.97
  8.58
  8.22
  7.90
  7.61
  7.35
Revenue, $m
  409
  633
  949
  1,379
  1,948
  2,682
  3,605
  4,739
  6,105
  7,719
  9,594
  11,739
  14,161
  16,861
  19,838
  23,090
  26,612
  30,398
  34,443
  38,739
  43,282
  48,067
  53,090
  58,348
  63,840
  69,568
  75,534
  81,741
  88,195
  94,904
  101,875
Variable operating expenses, $m
 
  1,548
  2,319
  3,371
  4,763
  6,557
  8,813
  11,587
  14,926
  18,872
  23,457
  28,702
  34,623
  41,224
  48,504
  56,455
  65,066
  74,323
  84,212
  94,718
  105,825
  117,524
  129,804
  142,660
  156,090
  170,095
  184,681
  199,857
  215,637
  232,039
  249,084
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
  499
  1,548
  2,319
  3,371
  4,763
  6,557
  8,813
  11,587
  14,926
  18,872
  23,457
  28,702
  34,623
  41,224
  48,504
  56,455
  65,066
  74,323
  84,212
  94,718
  105,825
  117,524
  129,804
  142,660
  156,090
  170,095
  184,681
  199,857
  215,637
  232,039
  249,084
Operating income, $m
  -91
  -915
  -1,371
  -1,992
  -2,815
  -3,875
  -5,209
  -6,848
  -8,821
  -11,153
  -13,863
  -16,963
  -20,462
  -24,364
  -28,666
  -33,365
  -38,454
  -43,925
  -49,770
  -55,978
  -62,543
  -69,457
  -76,714
  -84,312
  -92,249
  -100,526
  -109,147
  -118,116
  -127,442
  -137,136
  -147,209
EBITDA, $m
  229
  -418
  -626
  -910
  -1,286
  -1,770
  -2,379
  -3,128
  -4,029
  -5,094
  -6,332
  -7,748
  -9,346
  -11,128
  -13,093
  -15,239
  -17,564
  -20,063
  -22,732
  -25,568
  -28,566
  -31,724
  -35,039
  -38,509
  -42,135
  -45,915
  -49,852
  -53,949
  -58,209
  -62,636
  -67,237
Interest expense (income), $m
  46
  35
  70
  119
  186
  275
  390
  534
  711
  924
  1,175
  1,468
  1,803
  2,180
  2,602
  3,066
  3,573
  4,123
  4,713
  5,344
  6,015
  6,723
  7,470
  8,253
  9,074
  9,930
  10,824
  11,755
  12,723
  13,730
  14,776
Earnings before tax, $m
  -135
  -950
  -1,441
  -2,111
  -3,001
  -4,151
  -5,599
  -7,381
  -9,532
  -12,077
  -15,038
  -18,431
  -22,265
  -26,544
  -31,267
  -36,431
  -42,027
  -48,048
  -54,483
  -61,323
  -68,558
  -76,180
  -84,184
  -92,566
  -101,323
  -110,457
  -119,971
  -129,870
  -140,165
  -150,865
  -161,985
Tax expense, $m
  -39
  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
  -96
  -950
  -1,441
  -2,111
  -3,001
  -4,151
  -5,599
  -7,381
  -9,532
  -12,077
  -15,038
  -18,431
  -22,265
  -26,544
  -31,267
  -36,431
  -42,027
  -48,048
  -54,483
  -61,323
  -68,558
  -76,180
  -84,184
  -92,566
  -101,323
  -110,457
  -119,971
  -129,870
  -140,165
  -150,865
  -161,985

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  86
  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
  3,172
  4,760
  7,132
  10,366
  14,647
  20,165
  27,103
  35,631
  45,900
  58,034
  72,133
  88,265
  106,472
  126,771
  149,157
  173,608
  200,089
  228,558
  258,968
  291,273
  325,431
  361,406
  399,170
  438,704
  480,003
  523,071
  567,925
  614,594
  663,122
  713,561
  765,976
Adjusted assets (=assets-cash), $m
  3,086
  4,760
  7,132
  10,366
  14,647
  20,165
  27,103
  35,631
  45,900
  58,034
  72,133
  88,265
  106,472
  126,771
  149,157
  173,608
  200,089
  228,558
  258,968
  291,273
  325,431
  361,406
  399,170
  438,704
  480,003
  523,071
  567,925
  614,594
  663,122
  713,561
  765,976
Revenue / Adjusted assets
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
Average production assets, $m
  2,954
  4,572
  6,850
  9,956
  14,069
  19,369
  26,033
  34,225
  44,088
  55,744
  69,286
  84,781
  102,269
  121,767
  143,269
  166,755
  192,191
  219,535
  248,745
  279,775
  312,585
  347,140
  383,413
  421,387
  461,055
  502,423
  545,506
  590,334
  636,946
  685,394
  735,740
Working capital, $m
  -172
  -161
  -241
  -350
  -495
  -681
  -916
  -1,204
  -1,551
  -1,961
  -2,437
  -2,982
  -3,597
  -4,283
  -5,039
  -5,865
  -6,759
  -7,721
  -8,748
  -9,840
  -10,994
  -12,209
  -13,485
  -14,820
  -16,215
  -17,670
  -19,186
  -20,762
  -22,402
  -24,106
  -25,876
Total debt, $m
  930
  1,670
  2,841
  4,439
  6,554
  9,280
  12,707
  16,920
  21,993
  27,987
  34,952
  42,921
  51,915
  61,943
  73,002
  85,080
  98,162
  112,225
  127,248
  143,207
  160,081
  177,853
  196,508
  216,038
  236,439
  257,715
  279,873
  302,928
  326,900
  351,817
  377,710
Total liabilities, $m
  1,612
  2,352
  3,523
  5,121
  7,236
  9,962
  13,389
  17,602
  22,675
  28,669
  35,634
  43,603
  52,597
  62,625
  73,684
  85,762
  98,844
  112,907
  127,930
  143,889
  160,763
  178,535
  197,190
  216,720
  237,121
  258,397
  280,555
  303,610
  327,582
  352,499
  378,392
Total equity, $m
  1,560
  2,409
  3,609
  5,245
  7,411
  10,203
  13,714
  18,029
  23,225
  29,365
  36,499
  44,662
  53,875
  64,146
  75,473
  87,846
  101,245
  115,650
  131,038
  147,384
  164,668
  182,872
  201,980
  221,984
  242,881
  264,674
  287,370
  310,985
  335,540
  361,062
  387,584
Total liabilities and equity, $m
  3,172
  4,761
  7,132
  10,366
  14,647
  20,165
  27,103
  35,631
  45,900
  58,034
  72,133
  88,265
  106,472
  126,771
  149,157
  173,608
  200,089
  228,557
  258,968
  291,273
  325,431
  361,407
  399,170
  438,704
  480,002
  523,071
  567,925
  614,595
  663,122
  713,561
  765,976
Debt-to-equity ratio
  0.596
  0.690
  0.790
  0.850
  0.880
  0.910
  0.930
  0.940
  0.950
  0.950
  0.960
  0.960
  0.960
  0.970
  0.970
  0.970
  0.970
  0.970
  0.970
  0.970
  0.970
  0.970
  0.970
  0.970
  0.970
  0.970
  0.970
  0.970
  0.970
  0.970
  0.970
Adjusted equity ratio
  0.478
  0.506
  0.506
  0.506
  0.506
  0.506
  0.506
  0.506
  0.506
  0.506
  0.506
  0.506
  0.506
  0.506
  0.506
  0.506
  0.506
  0.506
  0.506
  0.506
  0.506
  0.506
  0.506
  0.506
  0.506
  0.506
  0.506
  0.506
  0.506
  0.506
  0.506

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -96
  -950
  -1,441
  -2,111
  -3,001
  -4,151
  -5,599
  -7,381
  -9,532
  -12,077
  -15,038
  -18,431
  -22,265
  -26,544
  -31,267
  -36,431
  -42,027
  -48,048
  -54,483
  -61,323
  -68,558
  -76,180
  -84,184
  -92,566
  -101,323
  -110,457
  -119,971
  -129,870
  -140,165
  -150,865
  -161,985
Depreciation, amort., depletion, $m
  320
  497
  745
  1,082
  1,529
  2,105
  2,830
  3,720
  4,792
  6,059
  7,531
  9,215
  11,116
  13,236
  15,573
  18,126
  20,890
  23,863
  27,038
  30,410
  33,977
  37,733
  41,675
  45,803
  50,115
  54,611
  59,294
  64,167
  69,233
  74,499
  79,972
Funds from operations, $m
  227
  -453
  -696
  -1,029
  -1,472
  -2,045
  -2,769
  -3,661
  -4,740
  -6,018
  -7,507
  -9,216
  -11,149
  -13,308
  -15,695
  -18,305
  -21,137
  -24,186
  -27,446
  -30,912
  -34,581
  -38,448
  -42,509
  -46,763
  -51,208
  -55,846
  -60,676
  -65,704
  -70,932
  -76,366
  -82,014
Change in working capital, $m
  -34
  -57
  -80
  -109
  -145
  -186
  -234
  -288
  -347
  -410
  -476
  -545
  -615
  -686
  -756
  -826
  -895
  -962
  -1,027
  -1,091
  -1,154
  -1,215
  -1,276
  -1,336
  -1,395
  -1,455
  -1,515
  -1,577
  -1,639
  -1,704
  -1,771
Cash from operations, $m
  261
  -396
  -616
  -920
  -1,327
  -1,859
  -2,534
  -3,373
  -4,393
  -5,608
  -7,031
  -8,671
  -10,534
  -12,623
  -14,938
  -17,479
  -20,243
  -23,224
  -26,418
  -29,821
  -33,427
  -37,232
  -41,233
  -45,427
  -49,813
  -54,391
  -59,161
  -64,127
  -69,292
  -74,662
  -80,243
Maintenance CAPEX, $m
  0
  -321
  -497
  -745
  -1,082
  -1,529
  -2,105
  -2,830
  -3,720
  -4,792
  -6,059
  -7,531
  -9,215
  -11,116
  -13,236
  -15,573
  -18,126
  -20,890
  -23,863
  -27,038
  -30,410
  -33,977
  -37,733
  -41,675
  -45,803
  -50,115
  -54,611
  -59,294
  -64,167
  -69,233
  -74,499
New CAPEX, $m
  -167
  -1,618
  -2,278
  -3,106
  -4,112
  -5,300
  -6,664
  -8,192
  -9,863
  -11,656
  -13,542
  -15,495
  -17,488
  -19,498
  -21,502
  -23,486
  -25,436
  -27,345
  -29,210
  -31,030
  -32,810
  -34,555
  -36,273
  -37,974
  -39,668
  -41,368
  -43,083
  -44,828
  -46,612
  -48,448
  -50,347
Cash from investing activities, $m
  33
  -1,939
  -2,775
  -3,851
  -5,194
  -6,829
  -8,769
  -11,022
  -13,583
  -16,448
  -19,601
  -23,026
  -26,703
  -30,614
  -34,738
  -39,059
  -43,562
  -48,235
  -53,073
  -58,068
  -63,220
  -68,532
  -74,006
  -79,649
  -85,471
  -91,483
  -97,694
  -104,122
  -110,779
  -117,681
  -124,846
Free cash flow, $m
  294
  -2,336
  -3,391
  -4,770
  -6,522
  -8,688
  -11,304
  -14,395
  -17,976
  -22,056
  -26,632
  -31,697
  -37,237
  -43,237
  -49,676
  -56,538
  -63,804
  -71,459
  -79,491
  -87,889
  -96,647
  -105,764
  -115,239
  -125,076
  -135,284
  -145,873
  -156,856
  -168,249
  -180,071
  -192,343
  -205,089
Issuance/(repayment) of debt, $m
  -258
  826
  1,172
  1,597
  2,115
  2,726
  3,427
  4,213
  5,073
  5,995
  6,965
  7,969
  8,994
  10,028
  11,059
  12,079
  13,082
  14,064
  15,023
  15,959
  16,874
  17,772
  18,655
  19,530
  20,401
  21,275
  22,158
  23,055
  23,973
  24,917
  25,893
Issuance/(repurchase) of shares, $m
  110
  1,799
  2,641
  3,748
  5,168
  6,943
  9,109
  11,697
  14,728
  18,217
  22,172
  26,594
  31,478
  36,815
  42,595
  48,803
  55,427
  62,453
  69,871
  77,669
  85,842
  94,384
  103,293
  112,570
  122,220
  132,249
  142,667
  153,485
  164,720
  176,388
  188,508
Cash from financing (excl. dividends), $m  
  -193
  2,625
  3,813
  5,345
  7,283
  9,669
  12,536
  15,910
  19,801
  24,212
  29,137
  34,563
  40,472
  46,843
  53,654
  60,882
  68,509
  76,517
  84,894
  93,628
  102,716
  112,156
  121,948
  132,100
  142,621
  153,524
  164,825
  176,540
  188,693
  201,305
  214,401
Total cash flow (excl. dividends), $m
  100
  289
  421
  574
  761
  980
  1,233
  1,515
  1,824
  2,156
  2,505
  2,866
  3,235
  3,606
  3,977
  4,344
  4,705
  5,058
  5,403
  5,739
  6,069
  6,391
  6,709
  7,024
  7,337
  7,651
  7,969
  8,291
  8,621
  8,961
  9,312
Retained Cash Flow (-), $m
  -12
  -1,799
  -2,641
  -3,748
  -5,168
  -6,943
  -9,109
  -11,697
  -14,728
  -18,217
  -22,172
  -26,594
  -31,478
  -36,815
  -42,595
  -48,803
  -55,427
  -62,453
  -69,871
  -77,669
  -85,842
  -94,384
  -103,293
  -112,570
  -122,220
  -132,249
  -142,667
  -153,485
  -164,720
  -176,388
  -188,508
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
 
  -1,510
  -2,219
  -3,173
  -4,407
  -5,962
  -7,877
  -10,182
  -12,903
  -16,061
  -19,667
  -23,728
  -28,243
  -33,209
  -38,618
  -44,459
  -50,722
  -57,396
  -64,468
  -71,930
  -79,773
  -87,992
  -96,584
  -105,546
  -114,883
  -124,598
  -134,698
  -145,194
  -156,099
  -167,427
  -179,196
Discount rate, %
 
  5.80
  6.09
  6.39
  6.71
  7.05
  7.40
  7.77
  8.16
  8.57
  9.00
  9.45
  9.92
  10.42
  10.94
  11.48
  12.06
  12.66
  13.29
  13.96
  14.66
  15.39
  16.16
  16.97
  17.81
  18.71
  19.64
  20.62
  21.65
  22.74
  23.87
PV of cash for distribution, $m
 
  -1,428
  -1,972
  -2,635
  -3,398
  -4,241
  -5,132
  -6,029
  -6,889
  -7,663
  -8,310
  -8,790
  -9,078
  -9,159
  -9,031
  -8,706
  -8,206
  -7,564
  -6,818
  -6,008
  -5,175
  -4,355
  -3,579
  -2,871
  -2,246
  -1,713
  -1,272
  -919
  -645
  -440
  -291
Current shareholders' claim on cash, %
  100
  37.8
  14.7
  5.9
  2.5
  1.1
  0.5
  0.2
  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
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0

Bonavista Energy Corporation is a resource company engaged in the acquisition, exploration, development and production of oil and natural gas assets. The Company's West Central Core Area is characterized by natural gas and light oil resources. West Central Core Area is located within the Western Canadian Sedimentary Basin (WCSB) between Calgary and Drayton Valley, Alberta. Its infrastructure in West Central Core Area includes over 2,800 kilometers of pipelines and approximately 40 facilities. Its Deep Basin Core Area contains multiple vertically stacked oil and natural gas reservoirs. Its Deep Basin Core Area is located within the WCSB between Edmonton and Fox Creek, Alberta. The Company's Deep Basin Core Area's production averages approximately 21,460 barrels of oil equivalent per day (boe/d). It has assembled a land position of approximately 295,110 net acres and identified over 300 horizontal drilling locations. Its assets are located in Alberta, British Columbia and Saskatchewan.

FINANCIAL RATIOS  of  Bonavista Energy Corporation (BNP)

Valuation Ratios
P/E Ratio -6.4
Price to Sales 1.5
Price to Book 0.4
Price to Tangible Book
Price to Cash Flow 2.4
Price to Free Cash Flow 6.5
Growth Rates
Sales Growth Rate -25.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -56.6%
Cap. Spend. - 3 Yr. Gr. Rate -18.6%
Financial Strength
Quick Ratio 1
Current Ratio 0.1
LT Debt to Equity 49.7%
Total Debt to Equity 59.6%
Interest Coverage -2
Management Effectiveness
Return On Assets -1.9%
Ret/ On Assets - 3 Yr. Avg. -6.5%
Return On Total Capital -3.6%
Ret/ On T. Cap. - 3 Yr. Avg. -9.2%
Return On Equity -6.2%
Return On Equity - 3 Yr. Avg. -14.8%
Asset Turnover 0.1
Profitability Ratios
Gross Margin 65.5%
Gross Margin - 3 Yr. Avg. 68.8%
EBITDA Margin 56.5%
EBITDA Margin - 3 Yr. Avg. 60.6%
Operating Margin -22%
Oper. Margin - 3 Yr. Avg. -50%
Pre-Tax Margin -33%
Pre-Tax Margin - 3 Yr. Avg. -68%
Net Profit Margin -23.5%
Net Profit Margin - 3 Yr. Avg. -53.6%
Effective Tax Rate 28.9%
Eff/ Tax Rate - 3 Yr. Avg. 45.8%
Payout Ratio -14.6%

BNP stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the BNP stock intrinsic value calculation we used $409 million for the last fiscal year's total revenue generated by Bonavista Energy Corporation. The default revenue input number comes from 2016 income statement of Bonavista 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 BNP stock valuation model: a) initial revenue growth rate of 54.8% 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 5.8%, whose default value for BNP is calculated based on our internal credit rating of Bonavista 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 Bonavista 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 BNP stock the variable cost ratio is equal to 244.5%.

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 BNP 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 4.2% for Bonavista Energy Corporation.

Corporate tax rate of 27% is the nominal tax rate for Bonavista 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 BNP 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 BNP are equal to 722.2%.

Life of production assets of 9.2 years is the average useful life of capital assets used in Bonavista 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 BNP is equal to -25.4%. 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 - $1560 million for Bonavista 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 264.447 million for Bonavista 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 Bonavista Energy Corporation at the current share price and the inputted number of shares is $0.6 billion.

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Financial statements of BNP
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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