Intrinsic value of Kelt Exploration Ltd. - KEL

Previous Close

$6.56

  Intrinsic Value

$1.25

stock screener

  Rating & Target

str. sell

-81%

  Value-price divergence*

0%

Previous close

$6.56

 
Intrinsic value

$1.25

 
Up/down potential

-81%

 
Rating

str. 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 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 1.1

 

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
  42.10
  38.39
  35.05
  32.05
  29.34
  26.91
  24.72
  22.74
  20.97
  19.37
  17.94
  16.64
  15.48
  14.43
  13.49
  12.64
  11.87
  11.19
  10.57
  10.01
  9.51
  9.06
  8.65
  8.29
  7.96
  7.66
  7.40
  7.16
  6.94
  6.75
Revenue, $m
  169
  240
  332
  449
  593
  767
  973
  1,213
  1,489
  1,802
  2,151
  2,536
  2,958
  3,416
  3,909
  4,436
  4,997
  5,591
  6,216
  6,873
  7,561
  8,280
  9,030
  9,812
  10,625
  11,471
  12,350
  13,263
  14,212
  15,199
  16,224
Variable operating expenses, $m
 
  503
  696
  940
  1,242
  1,606
  2,038
  2,542
  3,120
  3,774
  4,505
  5,313
  6,198
  7,157
  8,190
  9,294
  10,469
  11,712
  13,022
  14,399
  15,840
  17,347
  18,918
  20,555
  22,259
  24,031
  25,872
  27,786
  29,775
  31,842
  33,990
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
  503
  696
  940
  1,242
  1,606
  2,038
  2,542
  3,120
  3,774
  4,505
  5,313
  6,198
  7,157
  8,190
  9,294
  10,469
  11,712
  13,022
  14,399
  15,840
  17,347
  18,918
  20,555
  22,259
  24,031
  25,872
  27,786
  29,775
  31,842
  33,990
Operating income, $m
  -71
  -263
  -364
  -491
  -649
  -839
  -1,065
  -1,329
  -1,631
  -1,973
  -2,355
  -2,777
  -3,239
  -3,741
  -4,281
  -4,858
  -5,472
  -6,122
  -6,806
  -7,526
  -8,279
  -9,067
  -9,888
  -10,744
  -11,634
  -12,560
  -13,523
  -14,523
  -15,563
  -16,643
  -17,766
EBITDA, $m
  43
  -121
  -168
  -226
  -299
  -387
  -491
  -612
  -751
  -909
  -1,085
  -1,279
  -1,492
  -1,723
  -1,972
  -2,238
  -2,521
  -2,820
  -3,135
  -3,467
  -3,814
  -4,176
  -4,555
  -4,949
  -5,359
  -5,786
  -6,229
  -6,690
  -7,169
  -7,666
  -8,184
Interest expense (income), $m
  7
  7
  14
  23
  34
  47
  64
  83
  106
  133
  162
  195
  232
  272
  316
  363
  413
  466
  522
  582
  644
  710
  778
  849
  924
  1,001
  1,081
  1,165
  1,252
  1,342
  1,436
Earnings before tax, $m
  -59
  -270
  -378
  -514
  -683
  -887
  -1,129
  -1,412
  -1,737
  -2,105
  -2,517
  -2,973
  -3,471
  -4,013
  -4,596
  -5,220
  -5,885
  -6,588
  -7,329
  -8,108
  -8,924
  -9,776
  -10,666
  -11,593
  -12,558
  -13,561
  -14,604
  -15,688
  -16,814
  -17,985
  -19,201
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
  -270
  -378
  -514
  -683
  -887
  -1,129
  -1,412
  -1,737
  -2,105
  -2,517
  -2,973
  -3,471
  -4,013
  -4,596
  -5,220
  -5,885
  -6,588
  -7,329
  -8,108
  -8,924
  -9,776
  -10,666
  -11,593
  -12,558
  -13,561
  -14,604
  -15,688
  -16,814
  -17,985
  -19,201

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
  1,779
  2,462
  3,325
  4,390
  5,678
  7,206
  8,987
  11,031
  13,345
  15,930
  18,787
  21,914
  25,305
  28,957
  32,863
  37,016
  41,411
  46,044
  50,910
  56,007
  61,334
  66,891
  72,679
  78,703
  84,967
  91,478
  98,245
  105,277
  112,585
  120,181
Adjusted assets (=assets-cash), $m
  1,255
  1,779
  2,462
  3,325
  4,390
  5,678
  7,206
  8,987
  11,031
  13,345
  15,930
  18,787
  21,914
  25,305
  28,957
  32,863
  37,016
  41,411
  46,044
  50,910
  56,007
  61,334
  66,891
  72,679
  78,703
  84,967
  91,478
  98,245
  105,277
  112,585
  120,181
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
  709
  981
  1,325
  1,750
  2,264
  2,873
  3,583
  4,398
  5,320
  6,351
  7,490
  8,736
  10,088
  11,544
  13,101
  14,757
  16,509
  18,356
  20,296
  22,328
  24,451
  26,666
  28,974
  31,375
  33,872
  36,468
  39,166
  41,969
  44,882
  47,911
Working capital, $m
  -27
  -40
  -55
  -75
  -98
  -127
  -161
  -201
  -247
  -299
  -357
  -421
  -491
  -567
  -649
  -736
  -830
  -928
  -1,032
  -1,141
  -1,255
  -1,374
  -1,499
  -1,629
  -1,764
  -1,904
  -2,050
  -2,202
  -2,359
  -2,523
  -2,693
Total debt, $m
  183
  355
  580
  864
  1,214
  1,638
  2,141
  2,727
  3,399
  4,160
  5,011
  5,951
  6,980
  8,095
  9,297
  10,582
  11,948
  13,394
  14,919
  16,520
  18,196
  19,949
  21,777
  23,681
  25,663
  27,724
  29,866
  32,093
  34,406
  36,810
  39,310
Total liabilities, $m
  413
  585
  810
  1,094
  1,444
  1,868
  2,371
  2,957
  3,629
  4,390
  5,241
  6,181
  7,210
  8,325
  9,527
  10,812
  12,178
  13,624
  15,149
  16,750
  18,426
  20,179
  22,007
  23,911
  25,893
  27,954
  30,096
  32,323
  34,636
  37,040
  39,540
Total equity, $m
  843
  1,194
  1,652
  2,231
  2,946
  3,810
  4,835
  6,030
  7,402
  8,954
  10,689
  12,606
  14,704
  16,980
  19,430
  22,051
  24,838
  27,787
  30,896
  34,161
  37,581
  41,155
  44,884
  48,768
  52,809
  57,013
  61,382
  65,922
  70,641
  75,544
  80,642
Total liabilities and equity, $m
  1,256
  1,779
  2,462
  3,325
  4,390
  5,678
  7,206
  8,987
  11,031
  13,344
  15,930
  18,787
  21,914
  25,305
  28,957
  32,863
  37,016
  41,411
  46,045
  50,911
  56,007
  61,334
  66,891
  72,679
  78,702
  84,967
  91,478
  98,245
  105,277
  112,584
  120,182
Debt-to-equity ratio
  0.217
  0.300
  0.350
  0.390
  0.410
  0.430
  0.440
  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
  0.480
  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
  -270
  -378
  -514
  -683
  -887
  -1,129
  -1,412
  -1,737
  -2,105
  -2,517
  -2,973
  -3,471
  -4,013
  -4,596
  -5,220
  -5,885
  -6,588
  -7,329
  -8,108
  -8,924
  -9,776
  -10,666
  -11,593
  -12,558
  -13,561
  -14,604
  -15,688
  -16,814
  -17,985
  -19,201
Depreciation, amort., depletion, $m
  114
  142
  196
  265
  350
  453
  575
  717
  880
  1,064
  1,270
  1,498
  1,747
  2,018
  2,309
  2,620
  2,951
  3,302
  3,671
  4,059
  4,466
  4,890
  5,333
  5,795
  6,275
  6,774
  7,294
  7,833
  8,394
  8,976
  9,582
Funds from operations, $m
  32
  -128
  -181
  -249
  -333
  -434
  -555
  -695
  -858
  -1,041
  -1,247
  -1,475
  -1,724
  -1,995
  -2,288
  -2,600
  -2,933
  -3,286
  -3,658
  -4,049
  -4,458
  -4,886
  -5,333
  -5,798
  -6,283
  -6,787
  -7,310
  -7,855
  -8,420
  -9,008
  -9,619
Change in working capital, $m
  -13
  -12
  -15
  -19
  -24
  -29
  -34
  -40
  -46
  -52
  -58
  -64
  -70
  -76
  -82
  -88
  -93
  -99
  -104
  -109
  -114
  -119
  -125
  -130
  -135
  -140
  -146
  -152
  -158
  -164
  -170
Cash from operations, $m
  45
  -116
  -166
  -230
  -309
  -405
  -520
  -656
  -812
  -989
  -1,189
  -1,411
  -1,654
  -1,919
  -2,206
  -2,513
  -2,840
  -3,187
  -3,554
  -3,939
  -4,344
  -4,767
  -5,208
  -5,669
  -6,148
  -6,646
  -7,164
  -7,703
  -8,263
  -8,844
  -9,449
Maintenance CAPEX, $m
  0
  -100
  -142
  -196
  -265
  -350
  -453
  -575
  -717
  -880
  -1,064
  -1,270
  -1,498
  -1,747
  -2,018
  -2,309
  -2,620
  -2,951
  -3,302
  -3,671
  -4,059
  -4,466
  -4,890
  -5,333
  -5,795
  -6,275
  -6,774
  -7,294
  -7,833
  -8,394
  -8,976
New CAPEX, $m
  -104
  -210
  -272
  -344
  -425
  -514
  -609
  -710
  -815
  -922
  -1,031
  -1,139
  -1,246
  -1,352
  -1,456
  -1,557
  -1,656
  -1,752
  -1,847
  -1,940
  -2,032
  -2,123
  -2,215
  -2,308
  -2,401
  -2,497
  -2,596
  -2,698
  -2,803
  -2,913
  -3,028
Cash from investing activities, $m
  -97
  -310
  -414
  -540
  -690
  -864
  -1,062
  -1,285
  -1,532
  -1,802
  -2,095
  -2,409
  -2,744
  -3,099
  -3,474
  -3,866
  -4,276
  -4,703
  -5,149
  -5,611
  -6,091
  -6,589
  -7,105
  -7,641
  -8,196
  -8,772
  -9,370
  -9,992
  -10,636
  -11,307
  -12,004
Free cash flow, $m
  -52
  -426
  -580
  -770
  -999
  -1,269
  -1,582
  -1,940
  -2,343
  -2,791
  -3,284
  -3,820
  -4,399
  -5,019
  -5,679
  -6,379
  -7,116
  -7,891
  -8,703
  -9,551
  -10,435
  -11,356
  -12,314
  -13,309
  -14,344
  -15,419
  -16,535
  -17,694
  -18,899
  -20,152
  -21,454
Issuance/(repayment) of debt, $m
  21
  172
  225
  284
  351
  424
  503
  586
  673
  761
  851
  940
  1,029
  1,116
  1,201
  1,285
  1,366
  1,446
  1,524
  1,601
  1,677
  1,752
  1,828
  1,904
  1,982
  2,061
  2,142
  2,226
  2,313
  2,404
  2,499
Issuance/(repurchase) of shares, $m
  0
  622
  836
  1,093
  1,398
  1,751
  2,154
  2,607
  3,109
  3,657
  4,252
  4,890
  5,569
  6,289
  7,047
  7,841
  8,671
  9,537
  10,437
  11,373
  12,344
  13,351
  14,395
  15,477
  16,600
  17,764
  18,973
  20,228
  21,532
  22,888
  24,299
Cash from financing (excl. dividends), $m  
  52
  794
  1,061
  1,377
  1,749
  2,175
  2,657
  3,193
  3,782
  4,418
  5,103
  5,830
  6,598
  7,405
  8,248
  9,126
  10,037
  10,983
  11,961
  12,974
  14,021
  15,103
  16,223
  17,381
  18,582
  19,825
  21,115
  22,454
  23,845
  25,292
  26,798
Total cash flow (excl. dividends), $m
  0
  368
  480
  607
  750
  906
  1,075
  1,253
  1,438
  1,627
  1,819
  2,010
  2,200
  2,386
  2,569
  2,747
  2,922
  3,092
  3,259
  3,423
  3,586
  3,747
  3,909
  4,072
  4,238
  4,407
  4,581
  4,760
  4,947
  5,141
  5,344
Retained Cash Flow (-), $m
  4
  -622
  -836
  -1,093
  -1,398
  -1,751
  -2,154
  -2,607
  -3,109
  -3,657
  -4,252
  -4,890
  -5,569
  -6,289
  -7,047
  -7,841
  -8,671
  -9,537
  -10,437
  -11,373
  -12,344
  -13,351
  -14,395
  -15,477
  -16,600
  -17,764
  -18,973
  -20,228
  -21,532
  -22,888
  -24,299
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
 
  -253
  -356
  -486
  -648
  -845
  -1,079
  -1,354
  -1,671
  -2,030
  -2,433
  -2,880
  -3,370
  -3,903
  -4,478
  -5,094
  -5,750
  -6,445
  -7,178
  -7,950
  -8,758
  -9,603
  -10,486
  -11,405
  -12,362
  -13,358
  -14,392
  -15,468
  -16,586
  -17,747
  -18,955
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
 
  -241
  -320
  -411
  -513
  -622
  -734
  -845
  -950
  -1,043
  -1,120
  -1,177
  -1,212
  -1,223
  -1,209
  -1,171
  -1,113
  -1,036
  -946
  -846
  -741
  -636
  -535
  -439
  -353
  -277
  -212
  -159
  -115
  -82
  -56
Current shareholders' claim on cash, %
  100
  64.1
  41.8
  27.8
  18.8
  13.0
  9.1
  6.4
  4.6
  3.4
  2.5
  1.8
  1.4
  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
  0.0

Kelt Exploration Ltd., an oil and gas company, engages in the exploration, development, and production of crude oil and natural gas resources primarily in west central Alberta and northeastern British Columbia, Canada. As of December 31, 2015, the company owned interests in approximately 730,308 net acres of developed and undeveloped land. It also had proved developed producing reserves of 33.8 million barrels of oil equivalent (BOE); total proved reserves of 83.5 million BOE; and total proved plus probable reserves of 150.5 million BOE. The company is headquartered in Calgary, Canada.

FINANCIAL RATIOS  of  Kelt Exploration Ltd. (KEL)

Valuation Ratios
P/E Ratio -23
Price to Sales 6.8
Price to Book 1.4
Price to Tangible Book
Price to Cash Flow 25.6
Price to Free Cash Flow -19.5
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. -47.1%
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 42.1% 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 209.5%.

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 169.118 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 $1.1 billion.

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Stock chart of KEL 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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