Intrinsic value of Baytex Energy Corp. - BTE

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$3.26

  Intrinsic Value

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  Value-price divergence*

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$3.26

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

We calculate the intrinsic value of BTE 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 0.7

 

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, %
  -31.59
  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
  602
  963
  1,488
  2,226
  3,229
  4,556
  6,263
  8,407
  11,039
  14,204
  17,941
  22,279
  27,238
  32,831
  39,063
  45,931
  53,429
  61,546
  70,268
  79,582
  89,474
  99,931
  110,941
  122,497
  134,593
  147,228
  160,402
  174,122
  188,397
  203,240
  218,667
Variable operating expenses, $m
 
  2,410
  3,723
  5,568
  8,079
  11,399
  15,671
  21,034
  27,620
  35,540
  44,889
  55,742
  68,151
  82,144
  97,736
  114,920
  133,679
  153,987
  175,811
  199,115
  223,864
  250,027
  277,575
  306,488
  336,752
  368,363
  401,326
  435,654
  471,370
  508,506
  547,105
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
  1,287
  2,410
  3,723
  5,568
  8,079
  11,399
  15,671
  21,034
  27,620
  35,540
  44,889
  55,742
  68,151
  82,144
  97,736
  114,920
  133,679
  153,987
  175,811
  199,115
  223,864
  250,027
  277,575
  306,488
  336,752
  368,363
  401,326
  435,654
  471,370
  508,506
  547,105
Operating income, $m
  -685
  -1,447
  -2,235
  -3,343
  -4,850
  -6,843
  -9,407
  -12,627
  -16,581
  -21,335
  -26,948
  -33,463
  -40,912
  -49,313
  -58,673
  -68,989
  -80,250
  -92,441
  -105,543
  -119,533
  -134,390
  -150,096
  -166,634
  -183,991
  -202,159
  -221,136
  -240,924
  -261,532
  -282,973
  -305,266
  -328,438
EBITDA, $m
  -177
  -631
  -975
  -1,458
  -2,116
  -2,985
  -4,104
  -5,508
  -7,233
  -9,307
  -11,756
  -14,598
  -17,847
  -21,512
  -25,595
  -30,095
  -35,008
  -40,326
  -46,041
  -52,144
  -58,625
  -65,476
  -72,691
  -80,262
  -88,188
  -96,466
  -105,098
  -114,088
  -123,441
  -133,167
  -143,275
Interest expense (income), $m
  104
  102
  193
  326
  512
  765
  1,100
  1,531
  2,072
  2,736
  3,535
  4,478
  5,573
  6,824
  8,236
  9,808
  11,542
  13,434
  15,482
  17,683
  20,034
  22,530
  25,169
  27,948
  30,864
  33,917
  37,105
  40,430
  43,893
  47,495
  51,241
Earnings before tax, $m
  -758
  -1,548
  -2,428
  -3,668
  -5,362
  -7,608
  -10,507
  -14,158
  -18,652
  -24,071
  -30,483
  -37,941
  -46,485
  -56,137
  -66,908
  -78,797
  -91,792
  -105,875
  -121,025
  -137,216
  -154,424
  -172,626
  -191,803
  -211,938
  -233,023
  -255,053
  -278,029
  -301,962
  -326,865
  -352,762
  -379,679
Tax expense, $m
  -273
  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
  -485
  -1,548
  -2,428
  -3,668
  -5,362
  -7,608
  -10,507
  -14,158
  -18,652
  -24,071
  -30,483
  -37,941
  -46,485
  -56,137
  -66,908
  -78,797
  -91,792
  -105,875
  -121,025
  -137,216
  -154,424
  -172,626
  -191,803
  -211,938
  -233,023
  -255,053
  -278,029
  -301,962
  -326,865
  -352,762
  -379,679

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
  4,594
  7,353
  11,360
  16,989
  24,650
  34,777
  47,811
  64,176
  84,267
  108,431
  136,957
  170,070
  207,927
  250,622
  298,190
  350,619
  407,854
  469,814
  536,398
  607,498
  683,009
  762,830
  846,879
  935,092
  1,027,429
  1,123,875
  1,224,444
  1,329,178
  1,438,147
  1,551,450
  1,669,214
Adjusted assets (=assets-cash), $m
  4,591
  7,353
  11,360
  16,989
  24,650
  34,777
  47,811
  64,176
  84,267
  108,431
  136,957
  170,070
  207,927
  250,622
  298,190
  350,619
  407,854
  469,814
  536,398
  607,498
  683,009
  762,830
  846,879
  935,092
  1,027,429
  1,123,875
  1,224,444
  1,329,178
  1,438,147
  1,551,450
  1,669,214
Revenue / Adjusted assets
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
Average production assets, $m
  4,435
  7,096
  10,963
  16,395
  23,789
  33,563
  46,141
  61,935
  81,324
  104,644
  132,174
  164,131
  200,665
  241,869
  287,777
  338,374
  393,611
  453,406
  517,665
  586,283
  659,156
  736,190
  817,303
  902,436
  991,548
  1,084,626
  1,181,683
  1,282,759
  1,387,923
  1,497,269
  1,610,920
Working capital, $m
  -34
  -59
  -91
  -136
  -197
  -278
  -382
  -513
  -673
  -866
  -1,094
  -1,359
  -1,662
  -2,003
  -2,383
  -2,802
  -3,259
  -3,754
  -4,286
  -4,855
  -5,458
  -6,096
  -6,767
  -7,472
  -8,210
  -8,981
  -9,785
  -10,621
  -11,492
  -12,398
  -13,339
Total debt, $m
  1,754
  3,330
  5,614
  8,823
  13,189
  18,962
  26,391
  35,719
  47,171
  60,945
  77,205
  96,079
  117,657
  141,993
  169,108
  198,992
  231,616
  266,933
  304,886
  345,413
  388,454
  433,952
  481,860
  532,141
  584,773
  639,748
  697,072
  756,770
  818,883
  883,466
  950,591
Total liabilities, $m
  2,615
  4,191
  6,475
  9,684
  14,050
  19,823
  27,252
  36,580
  48,032
  61,806
  78,066
  96,940
  118,518
  142,854
  169,969
  199,853
  232,477
  267,794
  305,747
  346,274
  389,315
  434,813
  482,721
  533,002
  585,634
  640,609
  697,933
  757,631
  819,744
  884,327
  951,452
Total equity, $m
  1,979
  3,162
  4,885
  7,305
  10,599
  14,954
  20,559
  27,596
  36,235
  46,625
  58,892
  73,130
  89,409
  107,767
  128,222
  150,766
  175,377
  202,020
  230,651
  261,224
  293,694
  328,017
  364,158
  402,089
  441,794
  483,266
  526,511
  571,547
  618,403
  667,124
  717,762
Total liabilities and equity, $m
  4,594
  7,353
  11,360
  16,989
  24,649
  34,777
  47,811
  64,176
  84,267
  108,431
  136,958
  170,070
  207,927
  250,621
  298,191
  350,619
  407,854
  469,814
  536,398
  607,498
  683,009
  762,830
  846,879
  935,091
  1,027,428
  1,123,875
  1,224,444
  1,329,178
  1,438,147
  1,551,451
  1,669,214
Debt-to-equity ratio
  0.886
  1.050
  1.150
  1.210
  1.240
  1.270
  1.280
  1.290
  1.300
  1.310
  1.310
  1.310
  1.320
  1.320
  1.320
  1.320
  1.320
  1.320
  1.320
  1.320
  1.320
  1.320
  1.320
  1.320
  1.320
  1.320
  1.320
  1.320
  1.320
  1.320
  1.320
Adjusted equity ratio
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430
  0.430

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -485
  -1,548
  -2,428
  -3,668
  -5,362
  -7,608
  -10,507
  -14,158
  -18,652
  -24,071
  -30,483
  -37,941
  -46,485
  -56,137
  -66,908
  -78,797
  -91,792
  -105,875
  -121,025
  -137,216
  -154,424
  -172,626
  -191,803
  -211,938
  -233,023
  -255,053
  -278,029
  -301,962
  -326,865
  -352,762
  -379,679
Depreciation, amort., depletion, $m
  508
  816
  1,260
  1,885
  2,734
  3,858
  5,304
  7,119
  9,348
  12,028
  15,192
  18,866
  23,065
  27,801
  33,078
  38,894
  45,243
  52,116
  59,502
  67,389
  75,765
  84,619
  93,943
  103,728
  113,971
  124,670
  135,826
  147,444
  159,531
  172,100
  185,163
Funds from operations, $m
  722
  -733
  -1,168
  -1,784
  -2,627
  -3,750
  -5,204
  -7,039
  -9,305
  -12,043
  -15,290
  -19,076
  -23,420
  -28,336
  -33,830
  -39,903
  -46,549
  -53,760
  -61,523
  -69,827
  -78,659
  -88,007
  -97,860
  -108,210
  -119,052
  -130,383
  -142,204
  -154,518
  -167,334
  -180,662
  -194,516
Change in working capital, $m
  475
  -22
  -32
  -45
  -61
  -81
  -104
  -131
  -161
  -193
  -228
  -265
  -303
  -341
  -380
  -419
  -457
  -495
  -532
  -568
  -603
  -638
  -672
  -705
  -738
  -771
  -804
  -837
  -871
  -905
  -941
Cash from operations, $m
  247
  -977
  -1,136
  -1,739
  -2,566
  -3,669
  -5,099
  -6,908
  -9,144
  -11,850
  -15,062
  -18,811
  -23,117
  -27,995
  -33,450
  -39,484
  -46,092
  -53,264
  -60,991
  -69,259
  -78,056
  -87,369
  -97,188
  -107,505
  -118,314
  -129,612
  -141,400
  -153,681
  -166,463
  -179,756
  -193,575
Maintenance CAPEX, $m
  0
  -510
  -816
  -1,260
  -1,885
  -2,734
  -3,858
  -5,304
  -7,119
  -9,348
  -12,028
  -15,192
  -18,866
  -23,065
  -27,801
  -33,078
  -38,894
  -45,243
  -52,116
  -59,502
  -67,389
  -75,765
  -84,619
  -93,943
  -103,728
  -113,971
  -124,670
  -135,826
  -147,444
  -159,531
  -172,100
New CAPEX, $m
  -225
  -2,661
  -3,867
  -5,432
  -7,394
  -9,774
  -12,578
  -15,794
  -19,389
  -23,320
  -27,530
  -31,956
  -36,535
  -41,204
  -45,907
  -50,598
  -55,236
  -59,796
  -64,259
  -68,618
  -72,873
  -77,034
  -81,114
  -85,132
  -89,112
  -93,078
  -97,057
  -101,076
  -105,164
  -109,346
  -113,651
Cash from investing activities, $m
  -292
  -3,171
  -4,683
  -6,692
  -9,279
  -12,508
  -16,436
  -21,098
  -26,508
  -32,668
  -39,558
  -47,148
  -55,401
  -64,269
  -73,708
  -83,676
  -94,130
  -105,039
  -116,375
  -128,120
  -140,262
  -152,799
  -165,733
  -179,075
  -192,840
  -207,049
  -221,727
  -236,902
  -252,608
  -268,877
  -285,751
Free cash flow, $m
  -45
  -4,147
  -5,819
  -8,431
  -11,844
  -16,177
  -21,535
  -28,006
  -35,653
  -44,518
  -54,620
  -65,960
  -78,518
  -92,264
  -107,159
  -123,160
  -140,222
  -158,303
  -177,365
  -197,378
  -218,318
  -240,168
  -262,921
  -286,580
  -311,155
  -336,661
  -363,127
  -390,583
  -419,070
  -448,634
  -479,326
Issuance/(repayment) of debt, $m
  -61
  1,576
  2,284
  3,208
  4,367
  5,773
  7,429
  9,328
  11,452
  13,774
  16,260
  18,874
  21,578
  24,336
  27,114
  29,884
  32,624
  35,317
  37,953
  40,527
  43,041
  45,498
  47,908
  50,281
  52,632
  54,974
  57,324
  59,698
  62,112
  64,583
  67,125
Issuance/(repurchase) of shares, $m
  110
  3,754
  5,258
  7,643
  10,772
  14,759
  19,711
  25,714
  32,840
  41,135
  50,627
  61,324
  73,218
  86,286
  100,499
  115,820
  132,209
  149,628
  168,044
  187,424
  207,746
  228,993
  251,155
  274,231
  298,227
  323,159
  349,047
  375,921
  403,815
  432,772
  462,839
Cash from financing (excl. dividends), $m  
  49
  5,330
  7,542
  10,851
  15,139
  20,532
  27,140
  35,042
  44,292
  54,909
  66,887
  80,198
  94,796
  110,622
  127,613
  145,704
  164,833
  184,945
  205,997
  227,951
  250,787
  274,491
  299,063
  324,512
  350,859
  378,133
  406,371
  435,619
  465,927
  497,355
  529,964
Total cash flow (excl. dividends), $m
  2
  -2,571
  -3,535
  -5,223
  -7,478
  -10,405
  -14,106
  -18,677
  -24,201
  -30,744
  -38,361
  -47,085
  -56,939
  -67,927
  -80,045
  -93,275
  -107,598
  -122,986
  -139,413
  -156,851
  -175,277
  -194,670
  -215,014
  -236,299
  -258,523
  -281,687
  -305,802
  -330,885
  -356,958
  -384,051
  -412,200
Retained Cash Flow (-), $m
  435
  -1,186
  -1,723
  -2,420
  -3,294
  -4,355
  -5,604
  -7,037
  -8,639
  -10,391
  -12,266
  -14,238
  -16,278
  -18,359
  -20,455
  -22,544
  -24,611
  -26,643
  -28,631
  -30,573
  -32,469
  -34,323
  -36,141
  -37,932
  -39,705
  -41,472
  -43,245
  -45,036
  -46,857
  -48,720
  -50,638
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
 
  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
Discount rate, %
 
  9.50
  9.98
  10.47
  11.00
  11.55
  12.12
  12.73
  13.37
  14.04
  14.74
  15.47
  16.25
  17.06
  17.91
  18.81
  19.75
  20.74
  21.77
  22.86
  24.01
  25.21
  26.47
  27.79
  29.18
  30.64
  32.17
  33.78
  35.47
  37.24
  39.10
PV of cash for 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
Current shareholders' claim on cash, %
  100
  26.9
  8.0
  2.5
  0.8
  0.3
  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
  0.0
  0.0

Baytex Energy Corp., an oil and gas company, engages in the acquisition, development, exploitation, and production of oil and natural gas in the Western Canadian Sedimentary Basin and the United States. It offers heavy oil, light oil, condensate, and natural gas liquids. The company was founded in 1993 and is headquartered in Calgary, Canada.

FINANCIAL RATIOS  of  Baytex Energy Corp. (BTE)

Valuation Ratios
P/E Ratio -1.6
Price to Sales 1.3
Price to Book 0.4
Price to Tangible Book
Price to Cash Flow 3.1
Price to Free Cash Flow 34.6
Growth Rates
Sales Growth Rate -31.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -57%
Cap. Spend. - 3 Yr. Gr. Rate -16.6%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 88.6%
Total Debt to Equity 88.6%
Interest Coverage -6
Management Effectiveness
Return On Assets -8.3%
Ret/ On Assets - 3 Yr. Avg. -48.1%
Return On Total Capital -12.1%
Ret/ On T. Cap. - 3 Yr. Avg. -14%
Return On Equity -22.1%
Return On Equity - 3 Yr. Avg. -25.2%
Asset Turnover 0.1
Profitability Ratios
Gross Margin 60%
Gross Margin - 3 Yr. Avg. 66.8%
EBITDA Margin -24.3%
EBITDA Margin - 3 Yr. Avg. -22.1%
Operating Margin -113.8%
Oper. Margin - 3 Yr. Avg. -90.2%
Pre-Tax Margin -125.9%
Pre-Tax Margin - 3 Yr. Avg. -98.3%
Net Profit Margin -80.6%
Net Profit Margin - 3 Yr. Avg. -73%
Effective Tax Rate 36%
Eff/ Tax Rate - 3 Yr. Avg. 2269.7%
Payout Ratio 0%

BTE stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the BTE stock intrinsic value calculation we used $602 million for the last fiscal year's total revenue generated by Baytex Energy Corp.. The default revenue input number comes from 2016 income statement of Baytex Energy Corp.. 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 BTE 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 9.5%, whose default value for BTE is calculated based on our internal credit rating of Baytex Energy Corp., 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 Baytex Energy Corp..
    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 BTE stock the variable cost ratio is equal to 250.2%.

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 BTE 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 5.8% for Baytex Energy Corp..

Corporate tax rate of 27% is the nominal tax rate for Baytex Energy Corp.. 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 BTE 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 BTE are equal to 736.7%.

Life of production assets of 8.7 years is the average useful life of capital assets used in Baytex Energy Corp. 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 BTE is equal to -6.1%. 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 - $1979 million for Baytex Energy Corp. - 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 217.925 million for Baytex Energy Corp. 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 Baytex Energy Corp. at the current share price and the inputted number of shares is $0.7 billion.


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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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