Intrinsic value of Peyto Exploration & Development Corp. - PEY

Previous Close

$19.79

  Intrinsic Value

$2.42

stock screener

  Rating & Target

str. sell

-88%

  Value-price divergence*

-74%

Previous close

$19.79

 
Intrinsic value

$2.42

 
Up/down potential

-88%

 
Rating

str. sell

 
Value-price divergence*

-74%

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

We calculate the intrinsic value of PEY 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 3.2

 

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, %
  -8.59
  44.20
  40.28
  36.75
  33.58
  30.72
  28.15
  25.83
  23.75
  21.87
  20.19
  18.67
  17.30
  16.07
  14.96
  13.97
  13.07
  12.26
  11.54
  10.88
  10.30
  9.77
  9.29
  8.86
  8.47
  8.13
  7.81
  7.53
  7.28
  7.05
  6.85
Revenue, $m
  532
  767
  1,076
  1,472
  1,966
  2,570
  3,293
  4,144
  5,128
  6,249
  7,511
  8,913
  10,455
  12,135
  13,951
  15,900
  17,978
  20,183
  22,512
  24,962
  27,532
  30,220
  33,028
  35,954
  39,001
  42,170
  45,466
  48,890
  52,449
  56,148
  59,992
Variable operating expenses, $m
 
  572
  803
  1,098
  1,466
  1,917
  2,457
  3,091
  3,825
  4,662
  5,603
  6,649
  7,799
  9,053
  10,408
  11,861
  13,412
  15,057
  16,794
  18,621
  20,539
  22,544
  24,639
  26,822
  29,095
  31,459
  33,917
  36,472
  39,127
  41,886
  44,754
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
  464
  572
  803
  1,098
  1,466
  1,917
  2,457
  3,091
  3,825
  4,662
  5,603
  6,649
  7,799
  9,053
  10,408
  11,861
  13,412
  15,057
  16,794
  18,621
  20,539
  22,544
  24,639
  26,822
  29,095
  31,459
  33,917
  36,472
  39,127
  41,886
  44,754
Operating income, $m
  67
  195
  273
  374
  499
  653
  836
  1,052
  1,302
  1,587
  1,908
  2,264
  2,656
  3,082
  3,544
  4,039
  4,566
  5,126
  5,718
  6,340
  6,993
  7,676
  8,389
  9,132
  9,906
  10,711
  11,548
  12,418
  13,322
  14,262
  15,238
EBITDA, $m
  398
  671
  941
  1,287
  1,719
  2,248
  2,880
  3,624
  4,485
  5,466
  6,570
  7,796
  9,145
  10,615
  12,203
  13,908
  15,726
  17,654
  19,691
  21,834
  24,082
  26,434
  28,889
  31,449
  34,114
  36,887
  39,769
  42,765
  45,878
  49,113
  52,475
Interest expense (income), $m
  35
  37
  67
  106
  156
  218
  294
  386
  493
  617
  758
  918
  1,094
  1,289
  1,501
  1,730
  1,976
  2,238
  2,516
  2,810
  3,119
  3,443
  3,782
  4,136
  4,505
  4,890
  5,289
  5,705
  6,137
  6,586
  7,052
Earnings before tax, $m
  154
  157
  206
  268
  344
  435
  542
  667
  810
  970
  1,149
  1,346
  1,561
  1,793
  2,043
  2,309
  2,591
  2,889
  3,202
  3,531
  3,874
  4,233
  4,607
  4,996
  5,401
  5,822
  6,259
  6,713
  7,185
  7,676
  8,185
Tax expense, $m
  42
  42
  56
  72
  93
  117
  146
  180
  219
  262
  310
  364
  422
  484
  552
  623
  699
  780
  865
  953
  1,046
  1,143
  1,244
  1,349
  1,458
  1,572
  1,690
  1,813
  1,940
  2,072
  2,210
Net income, $m
  112
  115
  151
  196
  251
  317
  396
  487
  591
  708
  839
  983
  1,140
  1,309
  1,491
  1,685
  1,891
  2,109
  2,337
  2,577
  2,828
  3,090
  3,363
  3,647
  3,943
  4,250
  4,569
  4,901
  5,245
  5,603
  5,975

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  2
  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
  3,463
  4,981
  6,988
  9,556
  12,765
  16,686
  21,383
  26,907
  33,297
  40,580
  48,772
  57,877
  67,890
  78,801
  90,593
  103,247
  116,742
  131,059
  146,180
  162,090
  178,777
  196,236
  214,465
  233,467
  253,252
  273,833
  295,231
  317,470
  340,580
  364,596
  389,558
Adjusted assets (=assets-cash), $m
  3,461
  4,981
  6,988
  9,556
  12,765
  16,686
  21,383
  26,907
  33,297
  40,580
  48,772
  57,877
  67,890
  78,801
  90,593
  103,247
  116,742
  131,059
  146,180
  162,090
  178,777
  196,236
  214,465
  233,467
  253,252
  273,833
  295,231
  317,470
  340,580
  364,596
  389,558
Revenue / Adjusted assets
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
  0.154
Average production assets, $m
  3,269
  4,714
  6,613
  9,043
  12,080
  15,791
  20,235
  25,462
  31,510
  38,402
  46,154
  54,770
  64,247
  74,572
  85,731
  97,705
  110,476
  124,025
  138,334
  153,390
  169,182
  185,704
  202,955
  220,937
  239,660
  259,137
  279,386
  300,432
  322,301
  345,028
  368,650
Working capital, $m
  -187
  -272
  -382
  -522
  -698
  -912
  -1,169
  -1,471
  -1,820
  -2,219
  -2,666
  -3,164
  -3,712
  -4,308
  -4,953
  -5,644
  -6,382
  -7,165
  -7,992
  -8,861
  -9,774
  -10,728
  -11,725
  -12,764
  -13,845
  -14,970
  -16,140
  -17,356
  -18,620
  -19,932
  -21,297
Total debt, $m
  1,070
  1,913
  3,026
  4,452
  6,233
  8,409
  11,015
  14,081
  17,628
  21,670
  26,216
  31,270
  36,827
  42,883
  49,427
  56,450
  63,940
  71,886
  80,278
  89,108
  98,369
  108,059
  118,176
  128,722
  139,703
  151,126
  163,001
  175,344
  188,170
  201,499
  215,353
Total liabilities, $m
  1,922
  2,765
  3,878
  5,304
  7,085
  9,261
  11,867
  14,933
  18,480
  22,522
  27,068
  32,122
  37,679
  43,735
  50,279
  57,302
  64,792
  72,738
  81,130
  89,960
  99,221
  108,911
  119,028
  129,574
  140,555
  151,978
  163,853
  176,196
  189,022
  202,351
  216,205
Total equity, $m
  1,541
  2,217
  3,110
  4,253
  5,680
  7,425
  9,515
  11,973
  14,817
  18,058
  21,703
  25,755
  30,211
  35,066
  40,314
  45,945
  51,950
  58,321
  65,050
  72,130
  79,556
  87,325
  95,437
  103,893
  112,697
  121,856
  131,378
  141,274
  151,558
  162,245
  173,353
Total liabilities and equity, $m
  3,463
  4,982
  6,988
  9,557
  12,765
  16,686
  21,382
  26,906
  33,297
  40,580
  48,771
  57,877
  67,890
  78,801
  90,593
  103,247
  116,742
  131,059
  146,180
  162,090
  178,777
  196,236
  214,465
  233,467
  253,252
  273,834
  295,231
  317,470
  340,580
  364,596
  389,558
Debt-to-equity ratio
  0.694
  0.860
  0.970
  1.050
  1.100
  1.130
  1.160
  1.180
  1.190
  1.200
  1.210
  1.210
  1.220
  1.220
  1.230
  1.230
  1.230
  1.230
  1.230
  1.240
  1.240
  1.240
  1.240
  1.240
  1.240
  1.240
  1.240
  1.240
  1.240
  1.240
  1.240
Adjusted equity ratio
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  112
  115
  151
  196
  251
  317
  396
  487
  591
  708
  839
  983
  1,140
  1,309
  1,491
  1,685
  1,891
  2,109
  2,337
  2,577
  2,828
  3,090
  3,363
  3,647
  3,943
  4,250
  4,569
  4,901
  5,245
  5,603
  5,975
Depreciation, amort., depletion, $m
  331
  476
  668
  913
  1,220
  1,595
  2,044
  2,572
  3,183
  3,879
  4,662
  5,532
  6,490
  7,532
  8,660
  9,869
  11,159
  12,528
  13,973
  15,494
  17,089
  18,758
  20,500
  22,317
  24,208
  26,175
  28,221
  30,347
  32,556
  34,851
  37,237
Funds from operations, $m
  534
  591
  819
  1,109
  1,471
  1,912
  2,440
  3,059
  3,774
  4,587
  5,501
  6,515
  7,629
  8,842
  10,151
  11,555
  13,050
  14,636
  16,311
  18,071
  19,917
  21,848
  23,864
  25,964
  28,151
  30,425
  32,790
  35,247
  37,801
  40,455
  43,213
Change in working capital, $m
  25
  -83
  -110
  -140
  -175
  -214
  -257
  -302
  -349
  -398
  -448
  -498
  -547
  -596
  -645
  -692
  -738
  -783
  -827
  -870
  -912
  -954
  -997
  -1,039
  -1,082
  -1,125
  -1,170
  -1,216
  -1,263
  -1,313
  -1,365
Cash from operations, $m
  509
  675
  928
  1,249
  1,646
  2,127
  2,696
  3,361
  4,123
  4,986
  5,949
  7,013
  8,177
  9,438
  10,796
  12,246
  13,788
  15,419
  17,137
  18,941
  20,830
  22,803
  24,860
  27,003
  29,232
  31,550
  33,960
  36,463
  39,064
  41,768
  44,577
Maintenance CAPEX, $m
  0
  -330
  -476
  -668
  -913
  -1,220
  -1,595
  -2,044
  -2,572
  -3,183
  -3,879
  -4,662
  -5,532
  -6,490
  -7,532
  -8,660
  -9,869
  -11,159
  -12,528
  -13,973
  -15,494
  -17,089
  -18,758
  -20,500
  -22,317
  -24,208
  -26,175
  -28,221
  -30,347
  -32,556
  -34,851
New CAPEX, $m
  -469
  -1,445
  -1,899
  -2,430
  -3,036
  -3,711
  -4,445
  -5,227
  -6,047
  -6,893
  -7,752
  -8,616
  -9,476
  -10,325
  -11,159
  -11,975
  -12,771
  -13,549
  -14,309
  -15,056
  -15,792
  -16,522
  -17,250
  -17,982
  -18,723
  -19,477
  -20,249
  -21,045
  -21,870
  -22,727
  -23,622
Cash from investing activities, $m
  -490
  -1,775
  -2,375
  -3,098
  -3,949
  -4,931
  -6,040
  -7,271
  -8,619
  -10,076
  -11,631
  -13,278
  -15,008
  -16,815
  -18,691
  -20,635
  -22,640
  -24,708
  -26,837
  -29,029
  -31,286
  -33,611
  -36,008
  -38,482
  -41,040
  -43,685
  -46,424
  -49,266
  -52,217
  -55,283
  -58,473
Free cash flow, $m
  19
  -1,101
  -1,447
  -1,849
  -2,304
  -2,804
  -3,343
  -3,910
  -4,496
  -5,090
  -5,682
  -6,265
  -6,832
  -7,377
  -7,896
  -8,388
  -8,852
  -9,289
  -9,700
  -10,088
  -10,456
  -10,809
  -11,148
  -11,480
  -11,807
  -12,134
  -12,465
  -12,803
  -13,152
  -13,515
  -13,896
Issuance/(repayment) of debt, $m
  25
  843
  1,114
  1,425
  1,781
  2,176
  2,607
  3,066
  3,547
  4,042
  4,546
  5,053
  5,557
  6,055
  6,544
  7,023
  7,490
  7,946
  8,392
  8,830
  9,262
  9,690
  10,117
  10,546
  10,980
  11,423
  11,876
  12,343
  12,826
  13,329
  13,854
Issuance/(repurchase) of shares, $m
  180
  563
  742
  947
  1,177
  1,428
  1,694
  1,971
  2,253
  2,533
  2,806
  3,069
  3,316
  3,546
  3,756
  3,946
  4,114
  4,262
  4,391
  4,503
  4,598
  4,679
  4,749
  4,809
  4,861
  4,909
  4,953
  4,996
  5,039
  5,084
  5,133
Cash from financing (excl. dividends), $m  
  197
  1,406
  1,856
  2,372
  2,958
  3,604
  4,301
  5,037
  5,800
  6,575
  7,352
  8,122
  8,873
  9,601
  10,300
  10,969
  11,604
  12,208
  12,783
  13,333
  13,860
  14,369
  14,866
  15,355
  15,841
  16,332
  16,829
  17,339
  17,865
  18,413
  18,987
Total cash flow (excl. dividends), $m
  216
  305
  409
  524
  654
  800
  958
  1,126
  1,303
  1,485
  1,671
  1,857
  2,042
  2,225
  2,405
  2,580
  2,752
  2,920
  3,084
  3,244
  3,403
  3,560
  3,717
  3,875
  4,035
  4,197
  4,364
  4,535
  4,713
  4,898
  5,090
Retained Cash Flow (-), $m
  83
  -678
  -893
  -1,143
  -1,428
  -1,745
  -2,090
  -2,458
  -2,844
  -3,241
  -3,645
  -4,052
  -4,456
  -4,855
  -5,247
  -5,631
  -6,005
  -6,371
  -6,729
  -7,080
  -7,426
  -7,769
  -8,112
  -8,456
  -8,804
  -9,159
  -9,522
  -9,896
  -10,284
  -10,687
  -11,108
Prev. year cash balance distribution, $m
 
  2
  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
 
  -371
  -484
  -619
  -774
  -945
  -1,132
  -1,332
  -1,540
  -1,756
  -1,975
  -2,195
  -2,414
  -2,630
  -2,843
  -3,050
  -3,253
  -3,451
  -3,645
  -3,835
  -4,023
  -4,209
  -4,394
  -4,581
  -4,770
  -4,962
  -5,158
  -5,361
  -5,571
  -5,790
  -6,018
Discount rate, %
 
  5.60
  5.88
  6.17
  6.48
  6.81
  7.15
  7.50
  7.88
  8.27
  8.69
  9.12
  9.58
  10.06
  10.56
  11.09
  11.64
  12.22
  12.84
  13.48
  14.15
  14.86
  15.60
  16.38
  17.20
  18.06
  18.96
  19.91
  20.91
  21.95
  23.05
PV of cash for distribution, $m
 
  -351
  -431
  -517
  -602
  -680
  -748
  -802
  -840
  -859
  -858
  -840
  -805
  -757
  -697
  -630
  -559
  -486
  -415
  -347
  -285
  -229
  -181
  -140
  -106
  -78
  -56
  -40
  -27
  -18
  -12
Current shareholders' claim on cash, %
  100
  84.8
  72.9
  63.4
  55.9
  49.8
  44.8
  40.6
  37.2
  34.3
  31.9
  29.9
  28.1
  26.6
  25.2
  24.1
  23.1
  22.2
  21.4
  20.7
  20.1
  19.5
  19.0
  18.5
  18.1
  17.7
  17.4
  17.1
  16.8
  16.5
  16.3

Peyto Exploration & Development Corp., an energy company, engages in the exploration, development, and production of oil and natural gas, and natural gas liquids in Canada. The company’s oil and gas properties are located in the Alberta’s Deep Basin. As of December 31, 2015, it had a total proved plus probable reserves of 590 million barrels of oil equivalent. The company was formerly known as Peyto Energy Trust and changed its name to Peyto Exploration & Development Corp. in January 2011. Peyto Exploration & Development Corp. was founded in 1997 and is headquartered in Calgary, Canada.

FINANCIAL RATIOS  of  Peyto Exploration & Development Corp. (PEY)

Valuation Ratios
P/E Ratio 29.1
Price to Sales 6.1
Price to Book 2.1
Price to Tangible Book
Price to Cash Flow 6.4
Price to Free Cash Flow 81.5
Growth Rates
Sales Growth Rate -8.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -21%
Cap. Spend. - 3 Yr. Gr. Rate -4.1%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 69.4%
Total Debt to Equity 69.4%
Interest Coverage 5
Management Effectiveness
Return On Assets 4%
Ret/ On Assets - 3 Yr. Avg. 6.4%
Return On Total Capital 4.2%
Ret/ On T. Cap. - 3 Yr. Avg. 7%
Return On Equity 7.1%
Return On Equity - 3 Yr. Avg. 11.6%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 89.8%
Gross Margin - 3 Yr. Avg. 91.3%
EBITDA Margin 97.7%
EBITDA Margin - 3 Yr. Avg. 92.7%
Operating Margin 12.8%
Oper. Margin - 3 Yr. Avg. 30.4%
Pre-Tax Margin 28.9%
Pre-Tax Margin - 3 Yr. Avg. 36.2%
Net Profit Margin 21.1%
Net Profit Margin - 3 Yr. Avg. 25.2%
Effective Tax Rate 27.3%
Eff/ Tax Rate - 3 Yr. Avg. 30.2%
Payout Ratio 191.1%

PEY stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the PEY stock intrinsic value calculation we used $532 million for the last fiscal year's total revenue generated by Peyto Exploration & Development Corp.. The default revenue input number comes from 2016 income statement of Peyto Exploration & Development 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 PEY stock valuation model: a) initial revenue growth rate of 44.2% 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 5.6%, whose default value for PEY is calculated based on our internal credit rating of Peyto Exploration & Development 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 Peyto Exploration & Development 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 PEY stock the variable cost ratio is equal to 74.6%.

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 PEY 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 3.5% for Peyto Exploration & Development Corp..

Corporate tax rate of 27% is the nominal tax rate for Peyto Exploration & Development 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 PEY 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 PEY are equal to 614.5%.

Life of production assets of 9.9 years is the average useful life of capital assets used in Peyto Exploration & Development 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 PEY is equal to -35.5%. 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 - $1541 million for Peyto Exploration & Development 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 159.182 million for Peyto Exploration & Development 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 Peyto Exploration & Development Corp. at the current share price and the inputted number of shares is $3.2 billion.

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Stock chart of PEY Financial statements of PEY
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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