Intrinsic value of Precision Drilling Corporation - PD

Previous Close

$3.80

  Intrinsic Value

$1.50

stock screener

  Rating & Target

str. sell

-61%

  Value-price divergence*

0%

Previous close

$3.80

 
Intrinsic value

$1.50

 
Up/down potential

-61%

 
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 PD 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, %
  -38.88
  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
  951
  1,522
  2,351
  3,516
  5,101
  7,197
  9,894
  13,281
  17,439
  22,439
  28,343
  35,195
  43,029
  51,865
  61,709
  72,559
  84,403
  97,226
  111,005
  125,719
  141,345
  157,864
  175,257
  193,513
  212,621
  232,580
  253,393
  275,067
  297,618
  321,065
  345,436
Variable operating expenses, $m
 
  1,976
  3,042
  4,539
  6,577
  9,270
  12,737
  17,090
  22,433
  28,860
  36,448
  45,234
  55,303
  66,659
  79,311
  93,255
  108,478
  124,958
  142,667
  161,578
  181,662
  202,892
  225,247
  248,709
  273,268
  298,920
  325,669
  353,525
  382,508
  412,644
  443,966
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
  1,107
  1,976
  3,042
  4,539
  6,577
  9,270
  12,737
  17,090
  22,433
  28,860
  36,448
  45,234
  55,303
  66,659
  79,311
  93,255
  108,478
  124,958
  142,667
  161,578
  181,662
  202,892
  225,247
  248,709
  273,268
  298,920
  325,669
  353,525
  382,508
  412,644
  443,966
Operating income, $m
  -156
  -455
  -691
  -1,024
  -1,476
  -2,074
  -2,843
  -3,809
  -4,995
  -6,421
  -8,105
  -10,039
  -12,273
  -14,794
  -17,601
  -20,696
  -24,075
  -27,732
  -31,662
  -35,859
  -40,316
  -45,028
  -49,989
  -55,196
  -60,647
  -66,340
  -72,276
  -78,458
  -84,891
  -91,579
  -98,530
EBITDA, $m
  236
  163
  251
  376
  545
  769
  1,057
  1,419
  1,863
  2,398
  3,028
  3,760
  4,598
  5,542
  6,593
  7,753
  9,018
  10,388
  11,860
  13,433
  15,102
  16,867
  18,726
  20,676
  22,718
  24,850
  27,074
  29,390
  31,799
  34,304
  36,908
Interest expense (income), $m
  140
  130
  226
  366
  563
  830
  1,184
  1,639
  2,211
  2,913
  3,757
  4,753
  5,910
  7,232
  8,724
  10,385
  12,217
  14,216
  16,380
  18,706
  21,190
  23,828
  26,616
  29,552
  32,633
  35,859
  39,228
  42,741
  46,399
  50,206
  54,164
Earnings before tax, $m
  -309
  -584
  -917
  -1,389
  -2,038
  -2,904
  -4,027
  -5,448
  -7,206
  -9,334
  -11,862
  -14,792
  -18,183
  -22,026
  -26,325
  -31,082
  -36,291
  -41,948
  -48,043
  -54,566
  -61,506
  -68,856
  -76,605
  -84,748
  -93,280
  -102,199
  -111,504
  -121,199
  -131,290
  -141,784
  -152,694
Tax expense, $m
  -153
  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
  -156
  -584
  -917
  -1,389
  -2,038
  -2,904
  -4,027
  -5,448
  -7,206
  -9,334
  -11,862
  -14,792
  -18,183
  -22,026
  -26,325
  -31,082
  -36,291
  -41,948
  -48,043
  -54,566
  -61,506
  -68,856
  -76,605
  -84,748
  -93,280
  -102,199
  -111,504
  -121,199
  -131,290
  -141,784
  -152,694

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  116
  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
  4,324
  6,733
  10,402
  15,556
  22,571
  31,845
  43,780
  58,765
  77,162
  99,289
  125,410
  155,731
  190,396
  229,491
  273,049
  321,057
  373,467
  430,202
  491,172
  556,278
  625,422
  698,513
  775,476
  856,251
  940,803
  1,029,117
  1,121,207
  1,217,111
  1,316,892
  1,420,642
  1,528,477
Adjusted assets (=assets-cash), $m
  4,208
  6,733
  10,402
  15,556
  22,571
  31,845
  43,780
  58,765
  77,162
  99,289
  125,410
  155,731
  190,396
  229,491
  273,049
  321,057
  373,467
  430,202
  491,172
  556,278
  625,422
  698,513
  775,476
  856,251
  940,803
  1,029,117
  1,121,207
  1,217,111
  1,316,892
  1,420,642
  1,528,477
Revenue / Adjusted assets
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
  0.226
Average production assets, $m
  3,766
  6,026
  9,309
  13,922
  20,201
  28,500
  39,181
  52,592
  69,057
  88,860
  112,237
  139,373
  170,397
  205,385
  244,368
  287,333
  334,238
  385,014
  439,580
  497,847
  559,728
  625,141
  694,020
  766,310
  841,981
  921,019
  1,003,435
  1,089,265
  1,178,566
  1,271,418
  1,367,926
Working capital, $m
  231
  184
  284
  425
  617
  871
  1,197
  1,607
  2,110
  2,715
  3,429
  4,259
  5,207
  6,276
  7,467
  8,780
  10,213
  11,764
  13,432
  15,212
  17,103
  19,102
  21,206
  23,415
  25,727
  28,142
  30,661
  33,283
  36,012
  38,849
  41,798
Total debt, $m
  1,907
  3,322
  5,381
  8,272
  12,208
  17,410
  24,105
  32,512
  42,833
  55,246
  69,900
  86,910
  106,357
  128,289
  152,726
  179,658
  209,060
  240,888
  275,093
  311,617
  350,407
  391,411
  434,587
  479,902
  527,335
  576,880
  628,542
  682,344
  738,322
  796,525
  857,021
Total liabilities, $m
  2,362
  3,777
  5,836
  8,727
  12,663
  17,865
  24,560
  32,967
  43,288
  55,701
  70,355
  87,365
  106,812
  128,744
  153,181
  180,113
  209,515
  241,343
  275,548
  312,072
  350,862
  391,866
  435,042
  480,357
  527,790
  577,335
  628,997
  682,799
  738,777
  796,980
  857,476
Total equity, $m
  1,962
  2,956
  4,567
  6,829
  9,909
  13,980
  19,219
  25,798
  33,874
  43,588
  55,055
  68,366
  83,584
  100,747
  119,869
  140,944
  163,952
  188,859
  215,625
  244,206
  274,560
  306,647
  340,434
  375,894
  413,012
  451,782
  492,210
  534,312
  578,116
  623,662
  671,002
Total liabilities and equity, $m
  4,324
  6,733
  10,403
  15,556
  22,572
  31,845
  43,779
  58,765
  77,162
  99,289
  125,410
  155,731
  190,396
  229,491
  273,050
  321,057
  373,467
  430,202
  491,173
  556,278
  625,422
  698,513
  775,476
  856,251
  940,802
  1,029,117
  1,121,207
  1,217,111
  1,316,893
  1,420,642
  1,528,478
Debt-to-equity ratio
  0.972
  1.120
  1.180
  1.210
  1.230
  1.250
  1.250
  1.260
  1.260
  1.270
  1.270
  1.270
  1.270
  1.270
  1.270
  1.270
  1.280
  1.280
  1.280
  1.280
  1.280
  1.280
  1.280
  1.280
  1.280
  1.280
  1.280
  1.280
  1.280
  1.280
  1.280
Adjusted equity ratio
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439
  0.439

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -156
  -584
  -917
  -1,389
  -2,038
  -2,904
  -4,027
  -5,448
  -7,206
  -9,334
  -11,862
  -14,792
  -18,183
  -22,026
  -26,325
  -31,082
  -36,291
  -41,948
  -48,043
  -54,566
  -61,506
  -68,856
  -76,605
  -84,748
  -93,280
  -102,199
  -111,504
  -121,199
  -131,290
  -141,784
  -152,694
Depreciation, amort., depletion, $m
  392
  617
  942
  1,399
  2,021
  2,842
  3,900
  5,228
  6,858
  8,819
  11,133
  13,799
  16,871
  20,335
  24,195
  28,449
  33,093
  38,120
  43,523
  49,292
  55,419
  61,895
  68,715
  75,872
  83,364
  91,190
  99,350
  107,848
  116,690
  125,883
  135,438
Funds from operations, $m
  -10
  33
  25
  10
  -17
  -61
  -127
  -220
  -348
  -515
  -728
  -993
  -1,312
  -1,691
  -2,130
  -2,633
  -3,199
  -3,828
  -4,520
  -5,274
  -6,088
  -6,961
  -7,890
  -8,876
  -9,916
  -11,009
  -12,154
  -13,351
  -14,600
  -15,901
  -17,255
Change in working capital, $m
  -133
  69
  100
  141
  192
  254
  326
  410
  503
  605
  714
  829
  948
  1,069
  1,191
  1,313
  1,433
  1,551
  1,667
  1,780
  1,891
  1,999
  2,105
  2,209
  2,312
  2,415
  2,518
  2,623
  2,729
  2,837
  2,949
Cash from operations, $m
  123
  -36
  -75
  -131
  -209
  -315
  -453
  -630
  -851
  -1,120
  -1,443
  -1,822
  -2,260
  -2,760
  -3,321
  -3,946
  -4,632
  -5,379
  -6,187
  -7,054
  -7,979
  -8,959
  -9,995
  -11,085
  -12,228
  -13,424
  -14,672
  -15,974
  -17,329
  -18,739
  -20,204
Maintenance CAPEX, $m
  0
  -373
  -597
  -922
  -1,378
  -2,000
  -2,822
  -3,879
  -5,207
  -6,837
  -8,798
  -11,113
  -13,799
  -16,871
  -20,335
  -24,195
  -28,449
  -33,093
  -38,120
  -43,523
  -49,292
  -55,419
  -61,895
  -68,715
  -75,872
  -83,364
  -91,190
  -99,350
  -107,848
  -116,690
  -125,883
New CAPEX, $m
  -203
  -2,260
  -3,284
  -4,613
  -6,278
  -8,299
  -10,681
  -13,411
  -16,465
  -19,803
  -23,377
  -27,136
  -31,024
  -34,989
  -38,983
  -42,965
  -46,904
  -50,776
  -54,566
  -58,267
  -61,881
  -65,414
  -68,878
  -72,291
  -75,670
  -79,038
  -82,417
  -85,830
  -89,301
  -92,852
  -96,508
Cash from investing activities, $m
  -214
  -2,633
  -3,881
  -5,535
  -7,656
  -10,299
  -13,503
  -17,290
  -21,672
  -26,640
  -32,175
  -38,249
  -44,823
  -51,860
  -59,318
  -67,160
  -75,353
  -83,869
  -92,686
  -101,790
  -111,173
  -120,833
  -130,773
  -141,006
  -151,542
  -162,402
  -173,607
  -185,180
  -197,149
  -209,542
  -222,391
Free cash flow, $m
  -91
  -2,669
  -3,956
  -5,666
  -7,866
  -10,614
  -13,956
  -17,921
  -22,523
  -27,760
  -33,618
  -40,070
  -47,083
  -54,619
  -62,639
  -71,106
  -79,985
  -89,248
  -98,873
  -108,844
  -119,151
  -129,792
  -140,769
  -152,090
  -163,770
  -175,826
  -188,279
  -201,154
  -214,477
  -228,281
  -242,595
Issuance/(repayment) of debt, $m
  -208
  1,415
  2,059
  2,892
  3,935
  5,202
  6,695
  8,407
  10,321
  12,413
  14,654
  17,010
  19,447
  21,932
  24,436
  26,933
  29,402
  31,829
  34,204
  36,524
  38,790
  41,004
  43,176
  45,315
  47,433
  49,544
  51,662
  53,802
  55,977
  58,204
  60,495
Issuance/(repurchase) of shares, $m
  2
  1,694
  2,528
  3,652
  5,118
  6,975
  9,266
  12,027
  15,282
  19,047
  23,329
  28,103
  33,401
  39,189
  45,447
  52,157
  59,299
  66,855
  74,809
  83,147
  91,860
  100,943
  110,392
  120,209
  130,398
  140,969
  151,931
  163,301
  175,094
  187,331
  200,033
Cash from financing (excl. dividends), $m  
  -218
  3,109
  4,587
  6,544
  9,053
  12,177
  15,961
  20,434
  25,603
  31,460
  37,983
  45,113
  52,848
  61,121
  69,883
  79,090
  88,701
  98,684
  109,013
  119,671
  130,650
  141,947
  153,568
  165,524
  177,831
  190,513
  203,593
  217,103
  231,071
  245,535
  260,528
Total cash flow (excl. dividends), $m
  -329
  440
  631
  878
  1,187
  1,563
  2,005
  2,513
  3,080
  3,700
  4,365
  5,042
  5,765
  6,502
  7,244
  7,984
  8,716
  9,435
  10,140
  10,827
  11,499
  12,155
  12,799
  13,433
  14,061
  14,687
  15,315
  15,949
  16,594
  17,254
  17,933
Retained Cash Flow (-), $m
  159
  -1,694
  -2,528
  -3,652
  -5,118
  -6,975
  -9,266
  -12,027
  -15,282
  -19,047
  -23,329
  -28,103
  -33,401
  -39,189
  -45,447
  -52,157
  -59,299
  -66,855
  -74,809
  -83,147
  -91,860
  -100,943
  -110,392
  -120,209
  -130,398
  -140,969
  -151,931
  -163,301
  -175,094
  -187,331
  -200,033
Prev. year cash balance distribution, $m
 
  116
  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
 
  -1,138
  -1,897
  -2,774
  -3,931
  -5,412
  -7,261
  -9,514
  -12,202
  -15,347
  -18,964
  -23,060
  -27,636
  -32,687
  -38,203
  -44,173
  -50,583
  -57,420
  -64,669
  -72,320
  -80,362
  -88,787
  -97,593
  -106,775
  -116,337
  -126,282
  -136,616
  -147,352
  -158,500
  -170,077
  -182,100
Discount rate, %
 
  8.20
  8.61
  9.04
  9.49
  9.97
  10.47
  10.99
  11.54
  12.12
  12.72
  13.36
  14.02
  14.73
  15.46
  16.24
  17.05
  17.90
  18.79
  19.73
  20.72
  21.76
  22.84
  23.99
  25.19
  26.45
  27.77
  29.16
  30.61
  32.15
  33.75
PV of cash for distribution, $m
 
  -1,052
  -1,608
  -2,140
  -2,735
  -3,365
  -3,996
  -4,586
  -5,094
  -5,483
  -5,726
  -5,807
  -5,721
  -5,480
  -5,104
  -4,625
  -4,076
  -3,494
  -2,913
  -2,361
  -1,859
  -1,422
  -1,056
  -760
  -530
  -358
  -234
  -147
  -90
  -53
  -30
Current shareholders' claim on cash, %
  100
  43.3
  19.5
  9.1
  4.4
  2.2
  1.1
  0.6
  0.3
  0.2
  0.1
  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

Precision Drilling Corporation (Precision) is an oilfield services company. The Company provides onshore drilling and completion and production services to exploration and production companies in the oil and natural gas industry. The Company operates through two segments: Contract Drilling Services, and Completion and Production Services. The Contract Drilling Services segment operates its rigs in Canada, the United States and internationally. The Completion and Production Services segment provides completion and workover services and ancillary services to oil and natural gas exploration and production companies in Canada and the United States. As of December 31, 2016, the Contract Drilling Services segment consisted of 255 land drilling rigs, including 135 in Canada, 103 in the United States, five in Mexico, four in Saudi Arabia, five in Kuwait, two in the Kurdistan region of Iraq and one in the country of Georgia.

FINANCIAL RATIOS  of  Precision Drilling Corporation (PD)

Valuation Ratios
P/E Ratio -7.1
Price to Sales 1.2
Price to Book 0.6
Price to Tangible Book
Price to Cash Flow 9.1
Price to Free Cash Flow -13.9
Growth Rates
Sales Growth Rate -38.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -55.8%
Cap. Spend. - 3 Yr. Gr. Rate -17.6%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 97.2%
Total Debt to Equity 97.2%
Interest Coverage -1
Management Effectiveness
Return On Assets -1.9%
Ret/ On Assets - 3 Yr. Avg. -1.1%
Return On Total Capital -3.8%
Ret/ On T. Cap. - 3 Yr. Avg. -3.8%
Return On Equity -7.6%
Return On Equity - 3 Yr. Avg. -7.4%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 36.2%
Gross Margin - 3 Yr. Avg. 39%
EBITDA Margin 23.4%
EBITDA Margin - 3 Yr. Avg. 17%
Operating Margin -16.4%
Oper. Margin - 3 Yr. Avg. -13.9%
Pre-Tax Margin -32.5%
Pre-Tax Margin - 3 Yr. Avg. -22.7%
Net Profit Margin -16.4%
Net Profit Margin - 3 Yr. Avg. -12.8%
Effective Tax Rate 49.5%
Eff/ Tax Rate - 3 Yr. Avg. 9.4%
Payout Ratio 0%

PD stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the PD stock intrinsic value calculation we used $951 million for the last fiscal year's total revenue generated by Precision Drilling Corporation. The default revenue input number comes from 2016 income statement of Precision Drilling 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 PD 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 8.2%, whose default value for PD is calculated based on our internal credit rating of Precision Drilling 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 Precision Drilling 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 PD stock the variable cost ratio is equal to 130.7%.

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 PD 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 6.8% for Precision Drilling Corporation.

Corporate tax rate of 27% is the nominal tax rate for Precision Drilling 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 PD 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 PD are equal to 396%.

Life of production assets of 10.1 years is the average useful life of capital assets used in Precision Drilling 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 PD is equal to 12.1%. 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 - $1962 million for Precision Drilling 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 293.24 million for Precision Drilling 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 Precision Drilling Corporation at the current share price and the inputted number of shares is $1.1 billion.

RELATED COMPANIES Price Int.Val. Rating
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Financial statements of PD
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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