Intrinsic value of Spartan Energy Corp. - SPE

Previous Close

$6.57

  Intrinsic Value

$1.91

stock screener

  Rating & Target

str. sell

-71%

  Value-price divergence*

0%

Previous close

$6.57

 
Intrinsic value

$1.91

 
Up/down potential

-71%

 
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 SPE 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 1.2

 

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, %
  22.14
  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
  160
  256
  396
  592
  858
  1,211
  1,665
  2,234
  2,934
  3,775
  4,768
  5,921
  7,239
  8,726
  10,382
  12,208
  14,200
  16,358
  18,676
  21,151
  23,780
  26,560
  29,486
  32,557
  35,772
  39,130
  42,632
  46,278
  50,072
  54,017
  58,117
Variable operating expenses, $m
 
  453
  700
  1,046
  1,518
  2,142
  2,945
  3,953
  5,190
  6,678
  8,435
  10,475
  12,807
  15,436
  18,366
  21,595
  25,120
  28,937
  33,038
  37,417
  42,068
  46,984
  52,161
  57,594
  63,281
  69,221
  75,416
  81,866
  88,578
  95,557
  102,810
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
  193
  453
  700
  1,046
  1,518
  2,142
  2,945
  3,953
  5,190
  6,678
  8,435
  10,475
  12,807
  15,436
  18,366
  21,595
  25,120
  28,937
  33,038
  37,417
  42,068
  46,984
  52,161
  57,594
  63,281
  69,221
  75,416
  81,866
  88,578
  95,557
  102,810
Operating income, $m
  -32
  -197
  -304
  -455
  -660
  -931
  -1,280
  -1,718
  -2,256
  -2,903
  -3,667
  -4,554
  -5,567
  -6,710
  -7,984
  -9,388
  -10,920
  -12,579
  -14,362
  -16,265
  -18,287
  -20,424
  -22,675
  -25,037
  -27,509
  -30,091
  -32,784
  -35,588
  -38,506
  -41,539
  -44,692
EBITDA, $m
  71
  -33
  -51
  -76
  -110
  -155
  -213
  -285
  -375
  -482
  -609
  -756
  -924
  -1,114
  -1,326
  -1,559
  -1,813
  -2,089
  -2,385
  -2,701
  -3,037
  -3,392
  -3,765
  -4,158
  -4,568
  -4,997
  -5,444
  -5,910
  -6,394
  -6,898
  -7,422
Interest expense (income), $m
  4
  9
  20
  35
  58
  88
  128
  179
  243
  323
  418
  530
  661
  810
  978
  1,165
  1,372
  1,597
  1,841
  2,104
  2,384
  2,681
  2,996
  3,327
  3,674
  4,038
  4,418
  4,814
  5,227
  5,656
  6,102
Earnings before tax, $m
  -28
  -206
  -324
  -490
  -718
  -1,019
  -1,408
  -1,897
  -2,500
  -3,226
  -4,085
  -5,084
  -6,228
  -7,520
  -8,962
  -10,553
  -12,292
  -14,176
  -16,203
  -18,369
  -20,671
  -23,106
  -25,670
  -28,363
  -31,183
  -34,129
  -37,202
  -40,402
  -43,732
  -47,195
  -50,794
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
  -19
  -206
  -324
  -490
  -718
  -1,019
  -1,408
  -1,897
  -2,500
  -3,226
  -4,085
  -5,084
  -6,228
  -7,520
  -8,962
  -10,553
  -12,292
  -14,176
  -16,203
  -18,369
  -20,671
  -23,106
  -25,670
  -28,363
  -31,183
  -34,129
  -37,202
  -40,402
  -43,732
  -47,195
  -50,794

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $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
  0
Total assets, $m
  1,860
  2,977
  4,599
  6,878
  9,980
  14,080
  19,356
  25,982
  34,116
  43,899
  55,447
  68,853
  84,180
  101,465
  120,723
  141,949
  165,121
  190,205
  217,162
  245,947
  276,517
  308,833
  342,861
  378,574
  415,957
  455,003
  495,719
  538,120
  582,237
  628,108
  675,785
Adjusted assets (=assets-cash), $m
  1,860
  2,977
  4,599
  6,878
  9,980
  14,080
  19,356
  25,982
  34,116
  43,899
  55,447
  68,853
  84,180
  101,465
  120,723
  141,949
  165,121
  190,205
  217,162
  245,947
  276,517
  308,833
  342,861
  378,574
  415,957
  455,003
  495,719
  538,120
  582,237
  628,108
  675,785
Revenue / Adjusted assets
  0.086
  0.086
  0.086
  0.086
  0.086
  0.086
  0.086
  0.086
  0.086
  0.086
  0.086
  0.086
  0.086
  0.086
  0.086
  0.086
  0.086
  0.086
  0.086
  0.086
  0.086
  0.086
  0.086
  0.086
  0.086
  0.086
  0.086
  0.086
  0.086
  0.086
  0.086
Average production assets, $m
  1,262
  2,019
  3,120
  4,666
  6,770
  9,551
  13,131
  17,625
  23,143
  29,779
  37,614
  46,708
  57,105
  68,830
  81,895
  96,294
  112,013
  129,029
  147,316
  166,843
  187,581
  209,503
  232,586
  256,812
  282,172
  308,659
  336,280
  365,044
  394,971
  426,088
  458,431
Working capital, $m
  -219
  5
  8
  11
  16
  23
  32
  42
  56
  72
  91
  113
  138
  166
  197
  232
  270
  311
  355
  402
  452
  505
  560
  619
  680
  743
  810
  879
  951
  1,026
  1,104
Total debt, $m
  249
  560
  1,011
  1,644
  2,506
  3,646
  5,113
  6,955
  9,216
  11,936
  15,146
  18,873
  23,134
  27,939
  33,293
  39,194
  45,636
  52,609
  60,103
  68,105
  76,604
  85,588
  95,047
  104,976
  115,368
  126,223
  137,542
  149,329
  161,594
  174,346
  187,600
Total liabilities, $m
  517
  828
  1,279
  1,912
  2,774
  3,914
  5,381
  7,223
  9,484
  12,204
  15,414
  19,141
  23,402
  28,207
  33,561
  39,462
  45,904
  52,877
  60,371
  68,373
  76,872
  85,856
  95,315
  105,244
  115,636
  126,491
  137,810
  149,597
  161,862
  174,614
  187,868
Total equity, $m
  1,343
  2,149
  3,321
  4,966
  7,205
  10,165
  13,975
  18,759
  24,632
  31,695
  40,033
  49,712
  60,778
  73,258
  87,162
  102,487
  119,217
  137,328
  156,791
  177,574
  199,646
  222,978
  247,545
  273,330
  300,321
  328,512
  357,909
  388,523
  420,375
  453,494
  487,917
Total liabilities and equity, $m
  1,860
  2,977
  4,600
  6,878
  9,979
  14,079
  19,356
  25,982
  34,116
  43,899
  55,447
  68,853
  84,180
  101,465
  120,723
  141,949
  165,121
  190,205
  217,162
  245,947
  276,518
  308,834
  342,860
  378,574
  415,957
  455,003
  495,719
  538,120
  582,237
  628,108
  675,785
Debt-to-equity ratio
  0.185
  0.260
  0.300
  0.330
  0.350
  0.360
  0.370
  0.370
  0.370
  0.380
  0.380
  0.380
  0.380
  0.380
  0.380
  0.380
  0.380
  0.380
  0.380
  0.380
  0.380
  0.380
  0.380
  0.380
  0.380
  0.380
  0.380
  0.380
  0.380
  0.380
  0.380
Adjusted equity ratio
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722
  0.722

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -19
  -206
  -324
  -490
  -718
  -1,019
  -1,408
  -1,897
  -2,500
  -3,226
  -4,085
  -5,084
  -6,228
  -7,520
  -8,962
  -10,553
  -12,292
  -14,176
  -16,203
  -18,369
  -20,671
  -23,106
  -25,670
  -28,363
  -31,183
  -34,129
  -37,202
  -40,402
  -43,732
  -47,195
  -50,794
Depreciation, amort., depletion, $m
  103
  164
  254
  379
  550
  777
  1,068
  1,433
  1,882
  2,421
  3,058
  3,797
  4,643
  5,596
  6,658
  7,829
  9,107
  10,490
  11,977
  13,564
  15,250
  17,033
  18,909
  20,879
  22,941
  25,094
  27,340
  29,678
  32,111
  34,641
  37,271
Funds from operations, $m
  43
  -41
  -70
  -111
  -167
  -242
  -340
  -464
  -618
  -805
  -1,027
  -1,286
  -1,585
  -1,924
  -2,304
  -2,724
  -3,185
  -3,686
  -4,226
  -4,805
  -5,420
  -6,073
  -6,761
  -7,484
  -8,242
  -9,035
  -9,862
  -10,724
  -11,621
  -12,554
  -13,524
Change in working capital, $m
  -16
  2
  3
  4
  5
  7
  9
  11
  13
  16
  19
  22
  25
  28
  31
  35
  38
  41
  44
  47
  50
  53
  56
  58
  61
  64
  67
  69
  72
  75
  78
Cash from operations, $m
  59
  -43
  -73
  -115
  -172
  -249
  -349
  -475
  -631
  -821
  -1,046
  -1,308
  -1,610
  -1,952
  -2,335
  -2,759
  -3,223
  -3,727
  -4,270
  -4,852
  -5,470
  -6,126
  -6,817
  -7,543
  -8,303
  -9,099
  -9,928
  -10,793
  -11,693
  -12,629
  -13,602
Maintenance CAPEX, $m
  0
  -103
  -164
  -254
  -379
  -550
  -777
  -1,068
  -1,433
  -1,882
  -2,421
  -3,058
  -3,797
  -4,643
  -5,596
  -6,658
  -7,829
  -9,107
  -10,490
  -11,977
  -13,564
  -15,250
  -17,033
  -18,909
  -20,879
  -22,941
  -25,094
  -27,340
  -29,678
  -32,111
  -34,641
New CAPEX, $m
  -855
  -757
  -1,101
  -1,546
  -2,104
  -2,781
  -3,579
  -4,495
  -5,518
  -6,636
  -7,834
  -9,094
  -10,397
  -11,726
  -13,064
  -14,399
  -15,719
  -17,017
  -18,287
  -19,527
  -20,738
  -21,922
  -23,083
  -24,227
  -25,359
  -26,488
  -27,620
  -28,764
  -29,927
  -31,117
  -32,343
Cash from investing activities, $m
  -847
  -860
  -1,265
  -1,800
  -2,483
  -3,331
  -4,356
  -5,563
  -6,951
  -8,518
  -10,255
  -12,152
  -14,194
  -16,369
  -18,660
  -21,057
  -23,548
  -26,124
  -28,777
  -31,504
  -34,302
  -37,172
  -40,116
  -43,136
  -46,238
  -49,429
  -52,714
  -56,104
  -59,605
  -63,228
  -66,984
Free cash flow, $m
  -788
  -903
  -1,337
  -1,914
  -2,656
  -3,581
  -4,705
  -6,037
  -7,582
  -9,339
  -11,301
  -13,460
  -15,804
  -18,321
  -20,995
  -23,816
  -26,771
  -29,850
  -33,047
  -36,356
  -39,773
  -43,298
  -46,932
  -50,679
  -54,542
  -58,527
  -62,643
  -66,897
  -71,298
  -75,858
  -80,585
Issuance/(repayment) of debt, $m
  92
  311
  451
  634
  862
  1,140
  1,467
  1,842
  2,261
  2,720
  3,211
  3,727
  4,261
  4,805
  5,354
  5,901
  6,442
  6,973
  7,494
  8,002
  8,499
  8,984
  9,460
  9,928
  10,392
  10,855
  11,319
  11,788
  12,264
  12,752
  13,254
Issuance/(repurchase) of shares, $m
  721
  1,012
  1,495
  2,136
  2,957
  3,979
  5,217
  6,681
  8,372
  10,289
  12,423
  14,763
  17,293
  20,000
  22,866
  25,878
  29,022
  32,287
  35,666
  39,152
  42,743
  46,438
  50,238
  54,148
  58,173
  62,321
  66,598
  71,016
  75,584
  80,314
  85,217
Cash from financing (excl. dividends), $m  
  787
  1,323
  1,946
  2,770
  3,819
  5,119
  6,684
  8,523
  10,633
  13,009
  15,634
  18,490
  21,554
  24,805
  28,220
  31,779
  35,464
  39,260
  43,160
  47,154
  51,242
  55,422
  59,698
  64,076
  68,565
  73,176
  77,917
  82,804
  87,848
  93,066
  98,471
Total cash flow (excl. dividends), $m
  0
  419
  609
  855
  1,164
  1,538
  1,980
  2,486
  3,051
  3,670
  4,333
  5,029
  5,750
  6,485
  7,225
  7,963
  8,693
  9,410
  10,113
  10,799
  11,468
  12,123
  12,765
  13,398
  14,024
  14,648
  15,274
  15,907
  16,550
  17,209
  17,886
Retained Cash Flow (-), $m
  -732
  -1,012
  -1,495
  -2,136
  -2,957
  -3,979
  -5,217
  -6,681
  -8,372
  -10,289
  -12,423
  -14,763
  -17,293
  -20,000
  -22,866
  -25,878
  -29,022
  -32,287
  -35,666
  -39,152
  -42,743
  -46,438
  -50,238
  -54,148
  -58,173
  -62,321
  -66,598
  -71,016
  -75,584
  -80,314
  -85,217
Prev. year cash balance distribution, $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 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
 
  -593
  -886
  -1,281
  -1,793
  -2,441
  -3,238
  -4,195
  -5,321
  -6,619
  -8,090
  -9,733
  -11,544
  -13,515
  -15,642
  -17,915
  -20,329
  -22,877
  -25,553
  -28,353
  -31,274
  -34,314
  -37,473
  -40,750
  -44,149
  -47,672
  -51,324
  -55,109
  -59,034
  -63,105
  -67,331
Discount rate, %
 
  5.10
  5.36
  5.62
  5.90
  6.20
  6.51
  6.83
  7.18
  7.54
  7.91
  8.31
  8.72
  9.16
  9.62
  10.10
  10.60
  11.13
  11.69
  12.27
  12.89
  13.53
  14.21
  14.92
  15.66
  16.45
  17.27
  18.13
  19.04
  19.99
  20.99
PV of cash for distribution, $m
 
  -564
  -799
  -1,087
  -1,426
  -1,807
  -2,218
  -2,641
  -3,056
  -3,442
  -3,778
  -4,046
  -4,232
  -4,326
  -4,325
  -4,232
  -4,054
  -3,803
  -3,493
  -3,143
  -2,769
  -2,388
  -2,015
  -1,664
  -1,343
  -1,059
  -815
  -613
  -448
  -320
  -222
Current shareholders' claim on cash, %
  100
  53.3
  29.4
  16.8
  9.9
  6.1
  3.8
  2.4
  1.6
  1.1
  0.7
  0.5
  0.4
  0.3
  0.2
  0.1
  0.1
  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

Spartan Energy Corp, formerly Alexander Energy Ltd is a Canada-based oil and natural gas exploration and production company with producing properties focused in Saskatchewan. The Company's properties include Southeast Saskatchewan, West Central Saskatchewan and Alexander Alberta. The Southeast Saskatchewan property focuses on conventional Mississippian targets, primarily in the Frobisher/Alida and Midale formations. The West Central Saskatchewan property consists of approximately 100 net drilling locations in the Dodsland area of Saskatchewan. The Company holds interest in Alexander property, which own three dimensional (3D) seismic and all associated facilities. The Company's subsidiaries include Renegade Petroleum (North Dakota) Ltd. and Petro Uno Resources Ltd.

FINANCIAL RATIOS  of  Spartan Energy Corp. (SPE)

Valuation Ratios
P/E Ratio -60.6
Price to Sales 7.2
Price to Book 0.9
Price to Tangible Book
Price to Cash Flow 19.5
Price to Free Cash Flow -1.4
Growth Rates
Sales Growth Rate 22.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 1157.4%
Cap. Spend. - 3 Yr. Gr. Rate 192.4%
Financial Strength
Quick Ratio 0
Current Ratio 0
LT Debt to Equity 2%
Total Debt to Equity 18.5%
Interest Coverage -6
Management Effectiveness
Return On Assets -1.2%
Ret/ On Assets - 3 Yr. Avg. -1.5%
Return On Total Capital -1.7%
Ret/ On T. Cap. - 3 Yr. Avg. -2.1%
Return On Equity -1.9%
Return On Equity - 3 Yr. Avg. -2.5%
Asset Turnover 0.1
Profitability Ratios
Gross Margin 55%
Gross Margin - 3 Yr. Avg. 61.1%
EBITDA Margin 49.4%
EBITDA Margin - 3 Yr. Avg. 37.6%
Operating Margin -20.6%
Oper. Margin - 3 Yr. Avg. -29.4%
Pre-Tax Margin -17.5%
Pre-Tax Margin - 3 Yr. Avg. -25.5%
Net Profit Margin -11.9%
Net Profit Margin - 3 Yr. Avg. -18.3%
Effective Tax Rate 32.1%
Eff/ Tax Rate - 3 Yr. Avg. 28.8%
Payout Ratio 0%

SPE stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the SPE stock intrinsic value calculation we used $160 million for the last fiscal year's total revenue generated by Spartan Energy Corp.. The default revenue input number comes from 2016 income statement of Spartan Energy 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 SPE 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 5.1%, whose default value for SPE is calculated based on our internal credit rating of Spartan Energy 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 Spartan Energy 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 SPE stock the variable cost ratio is equal to 176.9%.

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 SPE 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 Spartan Energy Corp..

Corporate tax rate of 27% is the nominal tax rate for Spartan Energy 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 SPE 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 SPE are equal to 788.8%.

Life of production assets of 12.3 years is the average useful life of capital assets used in Spartan Energy 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 SPE is equal to 1.9%. 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 - $1343 million for Spartan Energy 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 175.603 million for Spartan Energy 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 Spartan Energy Corp. at the current share price and the inputted number of shares is $1.2 billion.

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Financial statements of SPE
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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