Intrinsic value of Parex Resources Inc. - PXT

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$17.24

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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Previous close

$17.24

 
Intrinsic value

$1.39

 
Up/down potential

-92%

 
Rating

str. sell

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

We calculate the intrinsic value of PXT 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 2.7

 

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, %
  -14.72
  20.60
  19.04
  17.64
  16.37
  15.24
  14.21
  13.29
  12.46
  11.72
  11.04
  10.44
  9.90
  9.41
  8.97
  8.57
  8.21
  7.89
  7.60
  7.34
  7.11
  6.90
  6.71
  6.54
  6.38
  6.24
  6.12
  6.01
  5.91
  5.82
  5.73
Revenue, $m
  556
  671
  798
  939
  1,093
  1,259
  1,438
  1,629
  1,832
  2,047
  2,273
  2,510
  2,759
  3,018
  3,289
  3,571
  3,864
  4,169
  4,486
  4,815
  5,157
  5,513
  5,883
  6,267
  6,667
  7,083
  7,517
  7,968
  8,439
  8,930
  9,442
Variable operating expenses, $m
 
  473
  562
  659
  765
  880
  1,004
  1,136
  1,276
  1,425
  1,581
  1,735
  1,907
  2,086
  2,273
  2,468
  2,671
  2,881
  3,100
  3,328
  3,565
  3,810
  4,066
  4,332
  4,608
  4,896
  5,196
  5,508
  5,833
  6,172
  6,526
Fixed operating expenses, $m
 
  257
  264
  270
  277
  284
  291
  298
  306
  313
  321
  329
  338
  346
  355
  364
  373
  382
  391
  401
  411
  422
  432
  443
  454
  465
  477
  489
  501
  514
  526
Total operating expenses, $m
  639
  730
  826
  929
  1,042
  1,164
  1,295
  1,434
  1,582
  1,738
  1,902
  2,064
  2,245
  2,432
  2,628
  2,832
  3,044
  3,263
  3,491
  3,729
  3,976
  4,232
  4,498
  4,775
  5,062
  5,361
  5,673
  5,997
  6,334
  6,686
  7,052
Operating income, $m
  -84
  -60
  -27
  10
  50
  95
  143
  195
  250
  309
  371
  446
  514
  586
  661
  739
  821
  905
  994
  1,086
  1,181
  1,281
  1,384
  1,492
  1,605
  1,722
  1,844
  1,972
  2,105
  2,244
  2,389
EBITDA, $m
  72
  116
  180
  252
  331
  417
  509
  608
  714
  825
  943
  1,067
  1,197
  1,333
  1,475
  1,623
  1,777
  1,938
  2,104
  2,278
  2,458
  2,646
  2,841
  3,044
  3,256
  3,476
  3,705
  3,945
  4,194
  4,455
  4,727
Interest expense (income), $m
  1
  0
  2
  4
  7
  9
  12
  15
  19
  22
  26
  30
  34
  38
  43
  48
  53
  58
  63
  69
  74
  80
  87
  93
  100
  107
  114
  122
  129
  138
  146
Earnings before tax, $m
  -96
  -60
  -29
  6
  44
  86
  131
  179
  231
  286
  345
  416
  480
  548
  618
  691
  768
  848
  931
  1,017
  1,107
  1,200
  1,298
  1,399
  1,505
  1,615
  1,730
  1,850
  1,975
  2,106
  2,243
Tax expense, $m
  -33
  0
  0
  1
  12
  23
  35
  48
  62
  77
  93
  112
  130
  148
  167
  187
  207
  229
  251
  275
  299
  324
  350
  378
  406
  436
  467
  500
  533
  569
  606
Net income, $m
  -63
  -60
  -29
  4
  32
  62
  96
  131
  169
  209
  252
  304
  351
  400
  451
  505
  561
  619
  679
  742
  808
  876
  947
  1,022
  1,099
  1,179
  1,263
  1,351
  1,442
  1,538
  1,637

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  202
  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
  1,241
  1,253
  1,492
  1,755
  2,042
  2,354
  2,688
  3,045
  3,425
  3,826
  4,249
  4,692
  5,156
  5,642
  6,147
  6,674
  7,222
  7,792
  8,384
  9,000
  9,639
  10,304
  10,995
  11,714
  12,462
  13,240
  14,050
  14,894
  15,774
  16,692
  17,649
Adjusted assets (=assets-cash), $m
  1,039
  1,253
  1,492
  1,755
  2,042
  2,354
  2,688
  3,045
  3,425
  3,826
  4,249
  4,692
  5,156
  5,642
  6,147
  6,674
  7,222
  7,792
  8,384
  9,000
  9,639
  10,304
  10,995
  11,714
  12,462
  13,240
  14,050
  14,894
  15,774
  16,692
  17,649
Revenue / Adjusted assets
  0.535
  0.536
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
Average production assets, $m
  744
  897
  1,067
  1,255
  1,461
  1,684
  1,923
  2,178
  2,450
  2,737
  3,039
  3,356
  3,688
  4,035
  4,397
  4,774
  5,166
  5,574
  5,997
  6,438
  6,895
  7,371
  7,865
  8,379
  8,914
  9,470
  10,050
  10,654
  11,283
  11,939
  12,624
Working capital, $m
  126
  -92
  -109
  -129
  -150
  -173
  -197
  -223
  -251
  -280
  -311
  -344
  -378
  -413
  -451
  -489
  -529
  -571
  -615
  -660
  -707
  -755
  -806
  -859
  -913
  -970
  -1,030
  -1,092
  -1,156
  -1,223
  -1,294
Total debt, $m
  0
  58
  121
  192
  268
  351
  441
  536
  637
  745
  857
  976
  1,100
  1,229
  1,364
  1,505
  1,651
  1,803
  1,962
  2,126
  2,297
  2,474
  2,659
  2,851
  3,050
  3,258
  3,474
  3,700
  3,935
  4,180
  4,435
Total liabilities, $m
  277
  335
  398
  469
  545
  628
  718
  813
  914
  1,022
  1,134
  1,253
  1,377
  1,506
  1,641
  1,782
  1,928
  2,080
  2,239
  2,403
  2,574
  2,751
  2,936
  3,128
  3,327
  3,535
  3,751
  3,977
  4,212
  4,457
  4,712
Total equity, $m
  964
  919
  1,094
  1,286
  1,497
  1,725
  1,970
  2,232
  2,510
  2,805
  3,114
  3,439
  3,780
  4,135
  4,506
  4,892
  5,294
  5,712
  6,146
  6,597
  7,066
  7,553
  8,060
  8,586
  9,134
  9,705
  10,299
  10,917
  11,562
  12,235
  12,937
Total liabilities and equity, $m
  1,241
  1,254
  1,492
  1,755
  2,042
  2,353
  2,688
  3,045
  3,424
  3,827
  4,248
  4,692
  5,157
  5,641
  6,147
  6,674
  7,222
  7,792
  8,385
  9,000
  9,640
  10,304
  10,996
  11,714
  12,461
  13,240
  14,050
  14,894
  15,774
  16,692
  17,649
Debt-to-equity ratio
  0.000
  0.060
  0.110
  0.150
  0.180
  0.200
  0.220
  0.240
  0.250
  0.270
  0.280
  0.280
  0.290
  0.300
  0.300
  0.310
  0.310
  0.320
  0.320
  0.320
  0.330
  0.330
  0.330
  0.330
  0.330
  0.340
  0.340
  0.340
  0.340
  0.340
  0.340
Adjusted equity ratio
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -63
  -60
  -29
  4
  32
  62
  96
  131
  169
  209
  252
  304
  351
  400
  451
  505
  561
  619
  679
  742
  808
  876
  947
  1,022
  1,099
  1,179
  1,263
  1,351
  1,442
  1,538
  1,637
Depreciation, amort., depletion, $m
  156
  176
  208
  242
  280
  322
  366
  413
  464
  517
  573
  622
  683
  747
  814
  884
  957
  1,032
  1,111
  1,192
  1,277
  1,365
  1,456
  1,552
  1,651
  1,754
  1,861
  1,973
  2,089
  2,211
  2,338
Funds from operations, $m
  221
  116
  178
  246
  312
  384
  461
  544
  632
  726
  824
  925
  1,034
  1,147
  1,265
  1,389
  1,517
  1,651
  1,790
  1,935
  2,085
  2,241
  2,404
  2,573
  2,749
  2,933
  3,124
  3,324
  3,532
  3,749
  3,975
Change in working capital, $m
  13
  -16
  -17
  -19
  -21
  -23
  -25
  -26
  -28
  -29
  -31
  -33
  -34
  -36
  -37
  -39
  -40
  -42
  -43
  -45
  -47
  -49
  -51
  -53
  -55
  -57
  -59
  -62
  -64
  -67
  -70
Cash from operations, $m
  208
  99
  196
  266
  333
  407
  486
  570
  660
  755
  855
  958
  1,068
  1,183
  1,302
  1,427
  1,557
  1,693
  1,833
  1,980
  2,132
  2,290
  2,455
  2,626
  2,804
  2,990
  3,184
  3,385
  3,596
  3,816
  4,045
Maintenance CAPEX, $m
  0
  -138
  -166
  -198
  -232
  -271
  -312
  -356
  -403
  -454
  -507
  -563
  -622
  -683
  -747
  -814
  -884
  -957
  -1,032
  -1,111
  -1,192
  -1,277
  -1,365
  -1,456
  -1,552
  -1,651
  -1,754
  -1,861
  -1,973
  -2,089
  -2,211
New CAPEX, $m
  -151
  -153
  -171
  -188
  -206
  -223
  -239
  -256
  -271
  -287
  -302
  -317
  -332
  -347
  -362
  -377
  -392
  -408
  -424
  -440
  -458
  -476
  -494
  -514
  -535
  -557
  -580
  -604
  -629
  -656
  -685
Cash from investing activities, $m
  -143
  -291
  -337
  -386
  -438
  -494
  -551
  -612
  -674
  -741
  -809
  -880
  -954
  -1,030
  -1,109
  -1,191
  -1,276
  -1,365
  -1,456
  -1,551
  -1,650
  -1,753
  -1,859
  -1,970
  -2,087
  -2,208
  -2,334
  -2,465
  -2,602
  -2,745
  -2,896
Free cash flow, $m
  65
  -192
  -141
  -120
  -105
  -86
  -65
  -41
  -15
  15
  46
  78
  114
  153
  193
  236
  281
  328
  378
  429
  482
  538
  595
  655
  718
  783
  850
  921
  994
  1,070
  1,150
Issuance/(repayment) of debt, $m
  0
  58
  64
  70
  77
  83
  89
  95
  101
  107
  113
  118
  124
  129
  135
  141
  146
  152
  158
  164
  171
  178
  185
  192
  200
  208
  216
  225
  235
  245
  256
Issuance/(repurchase) of shares, $m
  7
  89
  252
  243
  238
  231
  221
  208
  191
  172
  151
  129
  102
  73
  42
  9
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  7
  147
  316
  313
  315
  314
  310
  303
  292
  279
  264
  247
  226
  202
  177
  150
  146
  152
  158
  164
  171
  178
  185
  192
  200
  208
  216
  225
  235
  245
  256
Total cash flow (excl. dividends), $m
  74
  -134
  -77
  -50
  -28
  -3
  24
  54
  87
  122
  159
  196
  238
  282
  328
  377
  428
  481
  536
  593
  653
  715
  780
  847
  917
  990
  1,067
  1,146
  1,229
  1,315
  1,405
Retained Cash Flow (-), $m
  38
  -157
  -175
  -193
  -211
  -228
  -245
  -262
  -278
  -294
  -310
  -325
  -340
  -356
  -371
  -386
  -402
  -418
  -434
  -451
  -469
  -487
  -507
  -527
  -548
  -570
  -594
  -619
  -645
  -673
  -702
Prev. year cash balance distribution, $m
 
  202
  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
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  26
  63
  101
  142
  184
  228
  273
  320
  369
  420
  473
  527
  584
  643
  704
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  7
  14
  19
  22
  23
  24
  23
  21
  19
  16
  14
  11
  9
  7
  5
Current shareholders' claim on cash, %
  100
  96.0
  87.3
  80.9
  75.8
  71.8
  68.6
  66.1
  64.1
  62.6
  61.4
  60.5
  59.9
  59.4
  59.2
  59.2
  59.2
  59.2
  59.2
  59.2
  59.2
  59.2
  59.2
  59.2
  59.2
  59.2
  59.2
  59.2
  59.2
  59.2
  59.2

Parex Resources Inc. engages in the exploration, development, production, and marketing of oil and natural gas in Canada. It holds interests in onshore exploration and production blocks totaling approximately 1,870,122 gross acres in Colombia. As of December 31, 2015, the company had proved plus probable reserves of 81.7 million barrels of oil equivalent. Parex Resources Inc. was incorporated in 2009 and is headquartered in Calgary, Canada.

FINANCIAL RATIOS  of  Parex Resources Inc. (PXT)

Valuation Ratios
P/E Ratio -41.9
Price to Sales 4.7
Price to Book 2.7
Price to Tangible Book
Price to Cash Flow 12.7
Price to Free Cash Flow 46.3
Growth Rates
Sales Growth Rate -14.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -11.2%
Cap. Spend. - 3 Yr. Gr. Rate -13.7%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage -95
Management Effectiveness
Return On Assets -4.9%
Ret/ On Assets - 3 Yr. Avg. -6.7%
Return On Total Capital -6.4%
Ret/ On T. Cap. - 3 Yr. Avg. -10%
Return On Equity -6.4%
Return On Equity - 3 Yr. Avg. -10.6%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 80.9%
Gross Margin - 3 Yr. Avg. 80%
EBITDA Margin 11%
EBITDA Margin - 3 Yr. Avg. 19.3%
Operating Margin -14.9%
Oper. Margin - 3 Yr. Avg. -8.6%
Pre-Tax Margin -17.3%
Pre-Tax Margin - 3 Yr. Avg. -11.9%
Net Profit Margin -11.3%
Net Profit Margin - 3 Yr. Avg. -12.3%
Effective Tax Rate 34.4%
Eff/ Tax Rate - 3 Yr. Avg. -4.7%
Payout Ratio 0%

PXT stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the PXT stock intrinsic value calculation we used $556 million for the last fiscal year's total revenue generated by Parex Resources Inc.. The default revenue input number comes from 2016 income statement of Parex Resources Inc.. 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 PXT stock valuation model: a) initial revenue growth rate of 20.6% 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 4.3%, whose default value for PXT is calculated based on our internal credit rating of Parex Resources Inc., 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 Parex Resources Inc..
    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 PXT stock the variable cost ratio is equal to 70.9%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $251 million in the base year in the intrinsic value calculation for PXT 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 Parex Resources Inc..

Corporate tax rate of 27% is the nominal tax rate for Parex Resources Inc.. 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 PXT 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 PXT are equal to 133.7%.

Life of production assets of 5.4 years is the average useful life of capital assets used in Parex Resources Inc. 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 PXT is equal to -13.7%. 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 - $964 million for Parex Resources Inc. - 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 155.112 million for Parex Resources Inc. 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 Parex Resources Inc. at the current share price and the inputted number of shares is $2.7 billion.


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Stock chart of PXT Financial statements of PXT
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