Intrinsic value of Kelt Exploration Ltd. - KEL

Previous Close

$7.05

  Intrinsic Value

$1.18

stock screener

  Rating & Target

str. sell

-83%

Previous close

$7.05

 
Intrinsic value

$1.18

 
Up/down potential

-83%

 
Rating

str. sell

We calculate the intrinsic value of KEL 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 1.3

 

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, %
  5.62
  44.70
  40.73
  37.16
  33.94
  31.05
  28.44
  26.10
  23.99
  22.09
  20.38
  18.84
  17.46
  16.21
  15.09
  14.08
  13.17
  12.36
  11.62
  10.96
  10.36
  9.83
  9.34
  8.91
  8.52
  8.17
  7.85
  7.57
  7.31
  7.08
  6.87
Revenue, $m
  169
  245
  344
  472
  632
  829
  1,064
  1,342
  1,664
  2,031
  2,445
  2,906
  3,413
  3,967
  4,565
  5,208
  5,895
  6,623
  7,393
  8,203
  9,053
  9,942
  10,871
  11,840
  12,848
  13,898
  14,989
  16,123
  17,301
  18,525
  19,798
Variable operating expenses, $m
 
  537
  755
  1,036
  1,388
  1,819
  2,336
  2,945
  3,652
  4,459
  5,367
  6,379
  7,492
  8,707
  10,021
  11,432
  12,939
  14,537
  16,227
  18,005
  19,871
  21,823
  23,862
  25,988
  28,202
  30,505
  32,900
  35,389
  37,976
  40,663
  43,457
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
  240
  537
  755
  1,036
  1,388
  1,819
  2,336
  2,945
  3,652
  4,459
  5,367
  6,379
  7,492
  8,707
  10,021
  11,432
  12,939
  14,537
  16,227
  18,005
  19,871
  21,823
  23,862
  25,988
  28,202
  30,505
  32,900
  35,389
  37,976
  40,663
  43,457
Operating income, $m
  -71
  -292
  -411
  -564
  -756
  -990
  -1,272
  -1,604
  -1,988
  -2,427
  -2,922
  -3,473
  -4,079
  -4,740
  -5,456
  -6,224
  -7,044
  -7,914
  -8,834
  -9,802
  -10,818
  -11,881
  -12,991
  -14,149
  -15,354
  -16,608
  -17,911
  -19,267
  -20,675
  -22,138
  -23,659
EBITDA, $m
  43
  -148
  -208
  -285
  -382
  -501
  -643
  -811
  -1,006
  -1,228
  -1,478
  -1,756
  -2,063
  -2,398
  -2,759
  -3,148
  -3,563
  -4,003
  -4,468
  -4,958
  -5,471
  -6,009
  -6,571
  -7,156
  -7,766
  -8,400
  -9,059
  -9,745
  -10,457
  -11,197
  -11,966
Interest expense (income), $m
  7
  7
  14
  24
  36
  51
  70
  92
  119
  149
  184
  223
  267
  315
  368
  425
  486
  551
  620
  694
  771
  851
  936
  1,024
  1,116
  1,212
  1,312
  1,416
  1,523
  1,635
  1,752
Earnings before tax, $m
  -59
  -299
  -426
  -588
  -791
  -1,041
  -1,341
  -1,696
  -2,107
  -2,577
  -3,106
  -3,696
  -4,346
  -5,056
  -5,824
  -6,649
  -7,530
  -8,466
  -9,455
  -10,496
  -11,589
  -12,732
  -13,927
  -15,173
  -16,470
  -17,820
  -19,223
  -20,682
  -22,198
  -23,773
  -25,411
Tax expense, $m
  -9
  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
  -50
  -299
  -426
  -588
  -791
  -1,041
  -1,341
  -1,696
  -2,107
  -2,577
  -3,106
  -3,696
  -4,346
  -5,056
  -5,824
  -6,649
  -7,530
  -8,466
  -9,455
  -10,496
  -11,589
  -12,732
  -13,927
  -15,173
  -16,470
  -17,820
  -19,223
  -20,682
  -22,198
  -23,773
  -25,411

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $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
Total assets, $m
  1,256
  1,811
  2,549
  3,496
  4,683
  6,137
  7,883
  9,940
  12,324
  15,047
  18,113
  21,527
  25,285
  29,384
  33,818
  38,581
  43,663
  49,058
  54,759
  60,760
  67,057
  73,646
  80,528
  87,703
  95,174
  102,946
  111,027
  119,427
  128,155
  137,225
  146,653
Adjusted assets (=assets-cash), $m
  1,255
  1,811
  2,549
  3,496
  4,683
  6,137
  7,883
  9,940
  12,324
  15,047
  18,113
  21,527
  25,285
  29,384
  33,818
  38,581
  43,663
  49,058
  54,759
  60,760
  67,057
  73,646
  80,528
  87,703
  95,174
  102,946
  111,027
  119,427
  128,155
  137,225
  146,653
Revenue / Adjusted assets
  0.135
  0.135
  0.135
  0.135
  0.135
  0.135
  0.135
  0.135
  0.135
  0.135
  0.135
  0.135
  0.135
  0.135
  0.135
  0.135
  0.135
  0.135
  0.135
  0.135
  0.135
  0.135
  0.135
  0.135
  0.135
  0.135
  0.135
  0.135
  0.135
  0.135
  0.135
Average production assets, $m
  499
  722
  1,016
  1,394
  1,867
  2,447
  3,142
  3,963
  4,913
  5,998
  7,221
  8,582
  10,080
  11,714
  13,482
  15,380
  17,407
  19,557
  21,830
  24,222
  26,733
  29,359
  32,103
  34,963
  37,941
  41,040
  44,262
  47,610
  51,090
  54,706
  58,464
Working capital, $m
  -27
  -41
  -57
  -78
  -105
  -138
  -177
  -223
  -276
  -337
  -406
  -482
  -567
  -658
  -758
  -865
  -978
  -1,099
  -1,227
  -1,362
  -1,503
  -1,650
  -1,805
  -1,965
  -2,133
  -2,307
  -2,488
  -2,676
  -2,872
  -3,075
  -3,286
Total debt, $m
  183
  366
  609
  920
  1,311
  1,789
  2,363
  3,040
  3,825
  4,720
  5,729
  6,852
  8,089
  9,437
  10,896
  12,463
  14,135
  15,910
  17,786
  19,760
  21,832
  24,000
  26,264
  28,624
  31,082
  33,639
  36,298
  39,061
  41,933
  44,917
  48,019
Total liabilities, $m
  413
  596
  839
  1,150
  1,541
  2,019
  2,593
  3,270
  4,055
  4,950
  5,959
  7,082
  8,319
  9,667
  11,126
  12,693
  14,365
  16,140
  18,016
  19,990
  22,062
  24,230
  26,494
  28,854
  31,312
  33,869
  36,528
  39,291
  42,163
  45,147
  48,249
Total equity, $m
  843
  1,215
  1,711
  2,346
  3,142
  4,118
  5,289
  6,670
  8,270
  10,096
  12,154
  14,444
  16,966
  19,717
  22,692
  25,888
  29,298
  32,918
  36,744
  40,770
  44,995
  49,417
  54,034
  58,848
  63,861
  69,077
  74,499
  80,135
  85,992
  92,078
  98,404
Total liabilities and equity, $m
  1,256
  1,811
  2,550
  3,496
  4,683
  6,137
  7,882
  9,940
  12,325
  15,046
  18,113
  21,526
  25,285
  29,384
  33,818
  38,581
  43,663
  49,058
  54,760
  60,760
  67,057
  73,647
  80,528
  87,702
  95,173
  102,946
  111,027
  119,426
  128,155
  137,225
  146,653
Debt-to-equity ratio
  0.217
  0.300
  0.360
  0.390
  0.420
  0.430
  0.450
  0.460
  0.460
  0.470
  0.470
  0.470
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
Adjusted equity ratio
  0.671
  0.671
  0.671
  0.671
  0.671
  0.671
  0.671
  0.671
  0.671
  0.671
  0.671
  0.671
  0.671
  0.671
  0.671
  0.671
  0.671
  0.671
  0.671
  0.671
  0.671
  0.671
  0.671
  0.671
  0.671
  0.671
  0.671
  0.671
  0.671
  0.671
  0.671

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -50
  -299
  -426
  -588
  -791
  -1,041
  -1,341
  -1,696
  -2,107
  -2,577
  -3,106
  -3,696
  -4,346
  -5,056
  -5,824
  -6,649
  -7,530
  -8,466
  -9,455
  -10,496
  -11,589
  -12,732
  -13,927
  -15,173
  -16,470
  -17,820
  -19,223
  -20,682
  -22,198
  -23,773
  -25,411
Depreciation, amort., depletion, $m
  114
  144
  203
  279
  373
  489
  628
  793
  983
  1,200
  1,444
  1,716
  2,016
  2,343
  2,696
  3,076
  3,481
  3,911
  4,366
  4,844
  5,347
  5,872
  6,421
  6,993
  7,588
  8,208
  8,852
  9,522
  10,218
  10,941
  11,693
Funds from operations, $m
  32
  -155
  -222
  -309
  -418
  -552
  -713
  -903
  -1,124
  -1,377
  -1,662
  -1,980
  -2,330
  -2,713
  -3,127
  -3,573
  -4,049
  -4,554
  -5,089
  -5,651
  -6,242
  -6,861
  -7,507
  -8,180
  -8,882
  -9,612
  -10,371
  -11,160
  -11,980
  -12,832
  -13,718
Change in working capital, $m
  -13
  -13
  -17
  -21
  -27
  -33
  -39
  -46
  -53
  -61
  -69
  -76
  -84
  -92
  -99
  -107
  -114
  -121
  -128
  -134
  -141
  -148
  -154
  -161
  -167
  -174
  -181
  -188
  -196
  -203
  -211
Cash from operations, $m
  45
  -142
  -206
  -288
  -391
  -519
  -674
  -857
  -1,071
  -1,316
  -1,593
  -1,903
  -2,246
  -2,621
  -3,028
  -3,466
  -3,935
  -4,433
  -4,961
  -5,517
  -6,101
  -6,713
  -7,352
  -8,019
  -8,715
  -9,438
  -10,190
  -10,972
  -11,784
  -12,629
  -13,506
Maintenance CAPEX, $m
  0
  -100
  -144
  -203
  -279
  -373
  -489
  -628
  -793
  -983
  -1,200
  -1,444
  -1,716
  -2,016
  -2,343
  -2,696
  -3,076
  -3,481
  -3,911
  -4,366
  -4,844
  -5,347
  -5,872
  -6,421
  -6,993
  -7,588
  -8,208
  -8,852
  -9,522
  -10,218
  -10,941
New CAPEX, $m
  -104
  -223
  -294
  -378
  -473
  -580
  -696
  -820
  -951
  -1,085
  -1,223
  -1,361
  -1,498
  -1,634
  -1,768
  -1,899
  -2,026
  -2,151
  -2,273
  -2,392
  -2,510
  -2,627
  -2,743
  -2,860
  -2,978
  -3,099
  -3,222
  -3,348
  -3,480
  -3,616
  -3,758
Cash from investing activities, $m
  -97
  -323
  -438
  -581
  -752
  -953
  -1,185
  -1,448
  -1,744
  -2,068
  -2,423
  -2,805
  -3,214
  -3,650
  -4,111
  -4,595
  -5,102
  -5,632
  -6,184
  -6,758
  -7,354
  -7,974
  -8,615
  -9,281
  -9,971
  -10,687
  -11,430
  -12,200
  -13,002
  -13,834
  -14,699
Free cash flow, $m
  -52
  -465
  -644
  -869
  -1,143
  -1,472
  -1,859
  -2,306
  -2,814
  -3,384
  -4,016
  -4,708
  -5,461
  -6,271
  -7,139
  -8,061
  -9,037
  -10,065
  -11,145
  -12,275
  -13,456
  -14,686
  -15,968
  -17,300
  -18,685
  -20,125
  -21,620
  -23,173
  -24,786
  -26,463
  -28,206
Issuance/(repayment) of debt, $m
  21
  183
  243
  312
  390
  478
  574
  677
  784
  896
  1,009
  1,123
  1,236
  1,349
  1,459
  1,567
  1,672
  1,775
  1,876
  1,974
  2,072
  2,168
  2,264
  2,360
  2,458
  2,557
  2,659
  2,763
  2,872
  2,984
  3,102
Issuance/(repurchase) of shares, $m
  0
  673
  921
  1,223
  1,588
  2,017
  2,513
  3,076
  3,707
  4,403
  5,164
  5,986
  6,868
  7,806
  8,799
  9,844
  10,940
  12,086
  13,280
  14,522
  15,814
  17,154
  18,545
  19,987
  21,483
  23,035
  24,646
  26,318
  28,055
  29,860
  31,736
Cash from financing (excl. dividends), $m  
  52
  856
  1,164
  1,535
  1,978
  2,495
  3,087
  3,753
  4,491
  5,299
  6,173
  7,109
  8,104
  9,155
  10,258
  11,411
  12,612
  13,861
  15,156
  16,496
  17,886
  19,322
  20,809
  22,347
  23,941
  25,592
  27,305
  29,081
  30,927
  32,844
  34,838
Total cash flow (excl. dividends), $m
  0
  390
  519
  666
  835
  1,023
  1,228
  1,447
  1,677
  1,915
  2,157
  2,401
  2,644
  2,884
  3,120
  3,350
  3,576
  3,795
  4,011
  4,222
  4,430
  4,636
  4,841
  5,047
  5,256
  5,468
  5,685
  5,909
  6,140
  6,381
  6,632
Retained Cash Flow (-), $m
  4
  -673
  -921
  -1,223
  -1,588
  -2,017
  -2,513
  -3,076
  -3,707
  -4,403
  -5,164
  -5,986
  -6,868
  -7,806
  -8,799
  -9,844
  -10,940
  -12,086
  -13,280
  -14,522
  -15,814
  -17,154
  -18,545
  -19,987
  -21,483
  -23,035
  -24,646
  -26,318
  -28,055
  -29,860
  -31,736
Prev. year cash balance distribution, $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
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
 
  -281
  -402
  -557
  -753
  -994
  -1,285
  -1,629
  -2,029
  -2,488
  -3,007
  -3,585
  -4,224
  -4,923
  -5,680
  -6,494
  -7,365
  -8,290
  -9,269
  -10,301
  -11,384
  -12,518
  -13,704
  -14,940
  -16,228
  -17,567
  -18,961
  -20,409
  -21,914
  -23,479
  -25,104
Discount rate, %
 
  5.20
  5.46
  5.73
  6.02
  6.32
  6.64
  6.97
  7.32
  7.68
  8.07
  8.47
  8.89
  9.34
  9.81
  10.30
  10.81
  11.35
  11.92
  12.51
  13.14
  13.80
  14.49
  15.21
  15.97
  16.77
  17.61
  18.49
  19.41
  20.38
  21.40
PV of cash for distribution, $m
 
  -267
  -361
  -471
  -596
  -732
  -874
  -1,016
  -1,153
  -1,278
  -1,384
  -1,466
  -1,520
  -1,542
  -1,533
  -1,493
  -1,425
  -1,333
  -1,221
  -1,096
  -964
  -829
  -699
  -575
  -463
  -364
  -280
  -209
  -152
  -108
  -75
Current shareholders' claim on cash, %
  100
  65.2
  43.3
  29.3
  20.2
  14.1
  10.0
  7.2
  5.3
  3.9
  2.9
  2.2
  1.7
  1.3
  1.0
  0.8
  0.6
  0.5
  0.4
  0.3
  0.2
  0.2
  0.1
  0.1
  0.1
  0.1
  0.1
  0.0
  0.0
  0.0
  0.0

Kelt Exploration Ltd. is an oil and gas company based in Calgary, Alberta. The Company is focused on the exploration, development and production of crude oil and natural gas resources, primarily in west central Alberta and northeastern British Columbia. The Company's land holdings are located in Inga/Fireweed/Stoddart, British Columbia; Grande Prairie (including Pouce Coupe, Progress, Spirit River and La Glace), Alberta; Karr, Alberta, and Grande Cache, Alberta. The Company holds interests in approximately 136,000 gross acres in Greater Grande Cache area, which is located approximately 30 kilometers north of Grande Cache, Alberta. It also has interests in over 89,760 gross acres in Karr area. The Company has interests in over 394,190 acres in Grande Prairie area. It holds interests in over 88,120 gross acres in Inga area. The Company holds interests in over 50,550 acres in Fireweed area. The Company also has interests in approximately 53,040 gross acres in Stoddart area.

FINANCIAL RATIOS  of  Kelt Exploration Ltd. (KEL)

Valuation Ratios
P/E Ratio -24.8
Price to Sales 7.3
Price to Book 1.5
Price to Tangible Book
Price to Cash Flow 27.5
Price to Free Cash Flow -21
Growth Rates
Sales Growth Rate 5.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -43.2%
Cap. Spend. - 3 Yr. Gr. Rate -19.4%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 21.7%
Total Debt to Equity 21.7%
Interest Coverage -7
Management Effectiveness
Return On Assets -3.5%
Ret/ On Assets - 3 Yr. Avg. -4.8%
Return On Total Capital -4.9%
Ret/ On T. Cap. - 3 Yr. Avg. -6.5%
Return On Equity -5.9%
Return On Equity - 3 Yr. Avg. -7.7%
Asset Turnover 0.1
Profitability Ratios
Gross Margin 45%
Gross Margin - 3 Yr. Avg. 50.9%
EBITDA Margin 36.7%
EBITDA Margin - 3 Yr. Avg. 39.9%
Operating Margin -42%
Oper. Margin - 3 Yr. Avg. -50.4%
Pre-Tax Margin -34.9%
Pre-Tax Margin - 3 Yr. Avg. -43.2%
Net Profit Margin -29.6%
Net Profit Margin - 3 Yr. Avg. -37.3%
Effective Tax Rate 15.3%
Eff/ Tax Rate - 3 Yr. Avg. 30.6%
Payout Ratio 0%

KEL stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the KEL stock intrinsic value calculation we used $169 million for the last fiscal year's total revenue generated by Kelt Exploration Ltd.. The default revenue input number comes from 2016 income statement of Kelt Exploration 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 KEL stock valuation model: a) initial revenue growth rate of 44.7% 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 5.2%, whose default value for KEL is calculated based on our internal credit rating of Kelt Exploration 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 Kelt Exploration 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 KEL stock the variable cost ratio is equal to 219.5%.

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 KEL 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 3.9% for Kelt Exploration Ltd..

Corporate tax rate of 27% is the nominal tax rate for Kelt Exploration 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 KEL 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 KEL are equal to 295.3%.

Life of production assets of 4.4 years is the average useful life of capital assets used in Kelt Exploration 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 KEL is equal to -16.6%. 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 - $843 million for Kelt Exploration 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 178.918 million for Kelt Exploration 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 Kelt Exploration Ltd. at the current share price and the inputted number of shares is $1.3 billion.

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Financial statements of KEL
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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