Intrinsic value of Energold Drilling Corp - EGD

Previous Close

$0.40

  Intrinsic Value

$0.31

stock screener

  Rating & Target

sell

-23%

  Value-price divergence*

0%

Previous close

$0.40

 
Intrinsic value

$0.31

 
Up/down potential

-23%

 
Rating

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 EGD 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, %
  -20.73
  12.50
  11.75
  11.08
  10.47
  9.92
  9.43
  8.99
  8.59
  8.23
  7.91
  7.62
  7.35
  7.12
  6.91
  6.72
  6.54
  6.39
  6.25
  6.13
  6.01
  5.91
  5.82
  5.74
  5.66
  5.60
  5.54
  5.48
  5.44
  5.39
  5.35
Revenue, $m
  65
  73
  82
  91
  100
  110
  121
  131
  143
  154
  167
  179
  193
  206
  221
  235
  251
  267
  283
  301
  319
  338
  357
  378
  399
  422
  445
  469
  495
  522
  550
Variable operating expenses, $m
 
  78
  87
  96
  106
  117
  128
  139
  151
  164
  177
  190
  204
  218
  233
  249
  265
  282
  300
  318
  337
  357
  378
  400
  422
  446
  471
  496
  523
  552
  581
Fixed operating expenses, $m
 
  14
  15
  15
  15
  16
  16
  17
  17
  17
  18
  18
  19
  19
  20
  20
  21
  21
  22
  22
  23
  24
  24
  25
  25
  26
  27
  27
  28
  29
  29
Total operating expenses, $m
  83
  92
  102
  111
  121
  133
  144
  156
  168
  181
  195
  208
  223
  237
  253
  269
  286
  303
  322
  340
  360
  381
  402
  425
  447
  472
  498
  523
  551
  581
  610
Operating income, $m
  -17
  -19
  -20
  -21
  -22
  -22
  -23
  -24
  -26
  -27
  -28
  -29
  -30
  -31
  -32
  -34
  -35
  -37
  -38
  -40
  -41
  -43
  -45
  -46
  -48
  -50
  -52
  -54
  -56
  -59
  -61
EBITDA, $m
  -8
  -15
  -16
  -16
  -17
  -17
  -18
  -19
  -19
  -20
  -20
  -21
  -22
  -22
  -23
  -24
  -24
  -25
  -26
  -27
  -28
  -28
  -29
  -30
  -31
  -32
  -33
  -34
  -35
  -36
  -37
Interest expense (income), $m
  2
  0
  1
  1
  1
  1
  2
  2
  2
  3
  3
  4
  4
  4
  5
  5
  6
  6
  7
  7
  8
  8
  9
  10
  10
  11
  12
  12
  13
  14
  15
Earnings before tax, $m
  -18
  -19
  -20
  -21
  -23
  -24
  -25
  -27
  -28
  -29
  -31
  -32
  -34
  -35
  -37
  -39
  -41
  -43
  -45
  -47
  -49
  -51
  -54
  -56
  -58
  -61
  -64
  -67
  -69
  -73
  -76
Tax expense, $m
  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
Net income, $m
  -18
  -19
  -20
  -21
  -23
  -24
  -25
  -27
  -28
  -29
  -31
  -32
  -34
  -35
  -37
  -39
  -41
  -43
  -45
  -47
  -49
  -51
  -54
  -56
  -58
  -61
  -64
  -67
  -69
  -73
  -76

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  18
  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
  109
  102
  114
  127
  140
  154
  169
  184
  200
  216
  233
  251
  270
  289
  309
  330
  351
  374
  397
  421
  447
  473
  501
  529
  559
  591
  623
  657
  693
  731
  770
Adjusted assets (=assets-cash), $m
  91
  102
  114
  127
  140
  154
  169
  184
  200
  216
  233
  251
  270
  289
  309
  330
  351
  374
  397
  421
  447
  473
  501
  529
  559
  591
  623
  657
  693
  731
  770
Revenue / Adjusted assets
  0.714
  0.716
  0.719
  0.717
  0.714
  0.714
  0.716
  0.712
  0.715
  0.713
  0.717
  0.713
  0.715
  0.713
  0.715
  0.712
  0.715
  0.714
  0.713
  0.715
  0.714
  0.715
  0.713
  0.715
  0.714
  0.714
  0.714
  0.714
  0.714
  0.714
  0.714
Average production assets, $m
  14
  16
  18
  20
  22
  24
  26
  28
  31
  33
  36
  39
  41
  44
  47
  51
  54
  57
  61
  65
  69
  73
  77
  81
  86
  91
  96
  101
  106
  112
  118
Working capital, $m
  47
  37
  41
  45
  50
  55
  60
  66
  71
  77
  83
  90
  96
  103
  110
  118
  125
  133
  142
  150
  159
  169
  179
  189
  200
  211
  223
  235
  247
  261
  275
Total debt, $m
  21
  6
  8
  11
  14
  18
  21
  25
  28
  32
  36
  40
  44
  49
  53
  58
  63
  68
  74
  79
  85
  91
  98
  104
  111
  118
  126
  134
  142
  151
  160
Total liabilities, $m
  39
  24
  26
  29
  32
  36
  39
  43
  46
  50
  54
  58
  62
  67
  71
  76
  81
  86
  92
  97
  103
  109
  116
  122
  129
  136
  144
  152
  160
  169
  178
Total equity, $m
  70
  79
  88
  98
  108
  119
  130
  142
  154
  166
  180
  193
  207
  222
  238
  253
  270
  287
  305
  324
  343
  364
  385
  407
  430
  454
  479
  506
  533
  562
  592
Total liabilities and equity, $m
  109
  103
  114
  127
  140
  155
  169
  185
  200
  216
  234
  251
  269
  289
  309
  329
  351
  373
  397
  421
  446
  473
  501
  529
  559
  590
  623
  658
  693
  731
  770
Debt-to-equity ratio
  0.300
  0.070
  0.100
  0.120
  0.130
  0.150
  0.160
  0.170
  0.180
  0.190
  0.200
  0.210
  0.210
  0.220
  0.220
  0.230
  0.230
  0.240
  0.240
  0.240
  0.250
  0.250
  0.250
  0.260
  0.260
  0.260
  0.260
  0.260
  0.270
  0.270
  0.270
Adjusted equity ratio
  0.571
  0.769
  0.769
  0.769
  0.769
  0.769
  0.769
  0.769
  0.769
  0.769
  0.769
  0.769
  0.769
  0.769
  0.769
  0.769
  0.769
  0.769
  0.769
  0.769
  0.769
  0.769
  0.769
  0.769
  0.769
  0.769
  0.769
  0.769
  0.769
  0.769
  0.769

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -18
  -19
  -20
  -21
  -23
  -24
  -25
  -27
  -28
  -29
  -31
  -32
  -34
  -35
  -37
  -39
  -41
  -43
  -45
  -47
  -49
  -51
  -54
  -56
  -58
  -61
  -64
  -67
  -69
  -73
  -76
Depreciation, amort., depletion, $m
  9
  3
  4
  4
  5
  5
  5
  6
  6
  7
  7
  8
  8
  9
  9
  10
  11
  11
  12
  13
  14
  15
  15
  16
  17
  18
  19
  20
  21
  22
  24
Funds from operations, $m
  5
  -16
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -22
  -23
  -24
  -26
  -27
  -28
  -29
  -30
  -31
  -33
  -34
  -35
  -37
  -38
  -40
  -41
  -43
  -45
  -46
  -48
  -50
  -52
Change in working capital, $m
  8
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
Cash from operations, $m
  -3
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -30
  -31
  -32
  -33
  -35
  -36
  -38
  -39
  -41
  -43
  -44
  -46
  -48
  -50
  -52
  -54
  -56
  -59
  -61
  -63
  -66
Maintenance CAPEX, $m
  0
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -11
  -11
  -12
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
New CAPEX, $m
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
Cash from investing activities, $m
  -3
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -8
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -19
  -21
  -22
  -23
  -24
  -25
  -27
  -28
Free cash flow, $m
  -6
  -24
  -26
  -27
  -29
  -30
  -32
  -34
  -35
  -37
  -39
  -41
  -43
  -45
  -47
  -49
  -51
  -54
  -56
  -59
  -61
  -64
  -67
  -70
  -73
  -76
  -79
  -83
  -87
  -90
  -94
Issuance/(repayment) of debt, $m
  0
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
Issuance/(repurchase) of shares, $m
  6
  28
  30
  31
  33
  35
  36
  38
  40
  42
  44
  46
  48
  50
  53
  55
  57
  60
  63
  66
  68
  72
  75
  78
  82
  85
  89
  93
  97
  101
  106
Cash from financing (excl. dividends), $m  
  6
  31
  33
  34
  36
  38
  39
  42
  44
  46
  48
  50
  52
  54
  58
  60
  62
  65
  68
  72
  74
  78
  81
  85
  89
  92
  97
  101
  105
  110
  115
Total cash flow (excl. dividends), $m
  0
  6
  7
  7
  7
  8
  8
  8
  9
  9
  9
  9
  10
  10
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  16
  16
  17
  18
  19
  19
  20
Retained Cash Flow (-), $m
  21
  -28
  -30
  -31
  -33
  -35
  -36
  -38
  -40
  -42
  -44
  -46
  -48
  -50
  -53
  -55
  -57
  -60
  -63
  -66
  -68
  -72
  -75
  -78
  -82
  -85
  -89
  -93
  -97
  -101
  -106
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
 
  -22
  -23
  -24
  -26
  -27
  -29
  -30
  -32
  -33
  -35
  -37
  -38
  -40
  -42
  -44
  -46
  -48
  -51
  -53
  -55
  -58
  -60
  -63
  -66
  -69
  -72
  -75
  -78
  -82
  -85
Discount rate, %
 
  6.10
  6.41
  6.73
  7.06
  7.41
  7.79
  8.17
  8.58
  9.01
  9.46
  9.94
  10.43
  10.95
  11.50
  12.08
  12.68
  13.32
  13.98
  14.68
  15.41
  16.19
  16.99
  17.84
  18.74
  19.67
  20.66
  21.69
  22.77
  23.91
  25.11
PV of cash for distribution, $m
 
  -20
  -20
  -20
  -20
  -19
  -18
  -17
  -16
  -15
  -14
  -13
  -12
  -10
  -9
  -8
  -7
  -6
  -5
  -4
  -3
  -2
  -2
  -1
  -1
  -1
  -1
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  63.7
  41.5
  27.6
  18.6
  12.8
  8.9
  6.3
  4.5
  3.2
  2.3
  1.7
  1.3
  0.9
  0.7
  0.5
  0.4
  0.3
  0.2
  0.2
  0.1
  0.1
  0.1
  0.1
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0

Energold Drilling Corp., through its subsidiaries, provides drilling services. The Company operates through three segments: Minerals, Manufacturing and Energy. The Minerals segment provides drilling services in the minerals industry for parties in North America, Mexico, the Caribbean, Central America, South America, Africa and Europe. The Energy segment provides drilling and other services to the energy sector in Canada, the United States and South America. The Manufacturing segment designs and manufactures specialty/customized drilling rigs and associated equipment for water well, mineral exploration and geotechnical drilling companies. It has three business sectors: mineral exploration, energy exploration and equipment manufacturing. Its energy exploration involves the business operations of Bertram Drilling Corp., which specializes in oil sands coring in Alberta and seismic, geotechnical and geothermal exploration. It also provides diamond and pipeline drilling services.

FINANCIAL RATIOS  of  Energold Drilling Corp (EGD)

Valuation Ratios
P/E Ratio -1.2
Price to Sales 0.3
Price to Book 0.3
Price to Tangible Book
Price to Cash Flow -7.3
Price to Free Cash Flow -5.5
Growth Rates
Sales Growth Rate -20.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -50%
Cap. Spend. - 3 Yr. Gr. Rate -34%
Financial Strength
Quick Ratio 1
Current Ratio 0
LT Debt to Equity 1.4%
Total Debt to Equity 30%
Interest Coverage -8
Management Effectiveness
Return On Assets -13.3%
Ret/ On Assets - 3 Yr. Avg. -12.2%
Return On Total Capital -17.8%
Ret/ On T. Cap. - 3 Yr. Avg. -16%
Return On Equity -22.4%
Return On Equity - 3 Yr. Avg. -19.7%
Asset Turnover 0.5
Profitability Ratios
Gross Margin 13.8%
Gross Margin - 3 Yr. Avg. 16.2%
EBITDA Margin -10.8%
EBITDA Margin - 3 Yr. Avg. -9%
Operating Margin -27.7%
Oper. Margin - 3 Yr. Avg. -20.3%
Pre-Tax Margin -27.7%
Pre-Tax Margin - 3 Yr. Avg. -22.7%
Net Profit Margin -27.7%
Net Profit Margin - 3 Yr. Avg. -23.6%
Effective Tax Rate -5.6%
Eff/ Tax Rate - 3 Yr. Avg. -4.4%
Payout Ratio 0%

EGD stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the EGD stock intrinsic value calculation we used $65 million for the last fiscal year's total revenue generated by Energold Drilling Corp. The default revenue input number comes from 2016 income statement of Energold Drilling 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 EGD stock valuation model: a) initial revenue growth rate of 12.5% 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 6.1%, whose default value for EGD is calculated based on our internal credit rating of Energold Drilling 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 Energold Drilling 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 EGD stock the variable cost ratio is equal to 106.2%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $14 million in the base year in the intrinsic value calculation for EGD 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 9.8% for Energold Drilling Corp.

Corporate tax rate of 27% is the nominal tax rate for Energold Drilling 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 EGD 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 EGD are equal to 21.5%.

Life of production assets of 1.7 years is the average useful life of capital assets used in Energold Drilling 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 EGD is equal to 50%. 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 - $70 million for Energold Drilling 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 54.649 million for Energold Drilling 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 Energold Drilling Corp at the current share price and the inputted number of shares is $0.0 billion.

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Financial statements of EGD
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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