Intrinsic value of Vermilion Energy Inc. - VET

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$43.54

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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Previous close

$43.54

 
Intrinsic value

$3.33

 
Up/down potential

-92%

 
Rating

str. sell

 
Value-price divergence* premium content

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

We calculate the intrinsic value of VET 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 5.2

 

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, %
  -5.15
  12.40
  11.66
  10.99
  10.39
  9.86
  9.37
  8.93
  8.54
  8.19
  7.87
  7.58
  7.32
  7.09
  6.88
  6.69
  6.52
  6.37
  6.23
  6.11
  6.00
  5.90
  5.81
  5.73
  5.66
  5.59
  5.53
  5.48
  5.43
  5.39
  5.35
Revenue, $m
  829
  932
  1,040
  1,155
  1,275
  1,401
  1,532
  1,669
  1,811
  1,959
  2,113
  2,274
  2,440
  2,613
  2,793
  2,980
  3,174
  3,376
  3,587
  3,806
  4,035
  4,273
  4,521
  4,780
  5,050
  5,332
  5,627
  5,936
  6,258
  6,595
  6,948
Variable operating expenses, $m
 
  1,195
  1,335
  1,482
  1,636
  1,797
  1,965
  2,141
  2,324
  2,514
  2,712
  2,917
  3,131
  3,353
  3,583
  3,823
  4,073
  4,332
  4,602
  4,883
  5,176
  5,482
  5,800
  6,132
  6,479
  6,841
  7,220
  7,615
  8,029
  8,461
  8,914
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
  925
  1,195
  1,335
  1,482
  1,636
  1,797
  1,965
  2,141
  2,324
  2,514
  2,712
  2,917
  3,131
  3,353
  3,583
  3,823
  4,073
  4,332
  4,602
  4,883
  5,176
  5,482
  5,800
  6,132
  6,479
  6,841
  7,220
  7,615
  8,029
  8,461
  8,914
Operating income, $m
  -97
  -264
  -294
  -327
  -361
  -396
  -433
  -472
  -513
  -554
  -598
  -643
  -691
  -740
  -790
  -843
  -898
  -956
  -1,015
  -1,077
  -1,142
  -1,209
  -1,279
  -1,353
  -1,429
  -1,509
  -1,593
  -1,680
  -1,771
  -1,866
  -1,966
EBITDA, $m
  431
  192
  214
  237
  262
  288
  315
  343
  372
  403
  435
  467
  502
  537
  574
  613
  653
  694
  737
  783
  829
  878
  929
  983
  1,038
  1,096
  1,157
  1,220
  1,287
  1,356
  1,428
Interest expense (income), $m
  60
  59
  73
  87
  102
  118
  134
  151
  169
  187
  207
  227
  248
  269
  292
  315
  340
  365
  391
  419
  447
  477
  508
  540
  574
  609
  646
  685
  725
  767
  811
Earnings before tax, $m
  -223
  -323
  -367
  -414
  -463
  -514
  -567
  -623
  -681
  -742
  -805
  -870
  -938
  -1,009
  -1,082
  -1,159
  -1,238
  -1,321
  -1,406
  -1,496
  -1,589
  -1,686
  -1,787
  -1,893
  -2,003
  -2,118
  -2,239
  -2,364
  -2,496
  -2,633
  -2,777
Tax expense, $m
  -63
  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
  -160
  -323
  -367
  -414
  -463
  -514
  -567
  -623
  -681
  -742
  -805
  -870
  -938
  -1,009
  -1,082
  -1,159
  -1,238
  -1,321
  -1,406
  -1,496
  -1,589
  -1,686
  -1,787
  -1,893
  -2,003
  -2,118
  -2,239
  -2,364
  -2,496
  -2,633
  -2,777

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  63
  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
  4,087
  4,523
  5,051
  5,606
  6,189
  6,799
  7,436
  8,100
  8,791
  9,511
  10,259
  11,037
  11,845
  12,685
  13,558
  14,465
  15,409
  16,391
  17,412
  18,476
  19,585
  20,740
  21,945
  23,203
  24,515
  25,885
  27,317
  28,814
  30,378
  32,015
  33,727
Adjusted assets (=assets-cash), $m
  4,024
  4,523
  5,051
  5,606
  6,189
  6,799
  7,436
  8,100
  8,791
  9,511
  10,259
  11,037
  11,845
  12,685
  13,558
  14,465
  15,409
  16,391
  17,412
  18,476
  19,585
  20,740
  21,945
  23,203
  24,515
  25,885
  27,317
  28,814
  30,378
  32,015
  33,727
Revenue / Adjusted assets
  0.206
  0.206
  0.206
  0.206
  0.206
  0.206
  0.206
  0.206
  0.206
  0.206
  0.206
  0.206
  0.206
  0.206
  0.206
  0.206
  0.206
  0.206
  0.206
  0.206
  0.206
  0.206
  0.206
  0.206
  0.206
  0.206
  0.206
  0.206
  0.206
  0.206
  0.206
Average production assets, $m
  2,025
  2,276
  2,542
  2,821
  3,115
  3,421
  3,742
  4,076
  4,424
  4,787
  5,163
  5,554
  5,961
  6,384
  6,823
  7,280
  7,755
  8,249
  8,763
  9,298
  9,856
  10,438
  11,044
  11,677
  12,337
  13,027
  13,748
  14,501
  15,288
  16,112
  16,973
Working capital, $m
  -65
  -143
  -160
  -178
  -196
  -216
  -236
  -257
  -279
  -302
  -325
  -350
  -376
  -402
  -430
  -459
  -489
  -520
  -552
  -586
  -621
  -658
  -696
  -736
  -778
  -821
  -867
  -914
  -964
  -1,016
  -1,070
Total debt, $m
  1,382
  1,696
  2,025
  2,371
  2,735
  3,115
  3,513
  3,927
  4,359
  4,808
  5,275
  5,760
  6,264
  6,788
  7,333
  7,899
  8,488
  9,101
  9,738
  10,402
  11,094
  11,815
  12,567
  13,351
  14,170
  15,025
  15,919
  16,853
  17,829
  18,850
  19,919
Total liabilities, $m
  2,509
  2,823
  3,152
  3,498
  3,862
  4,242
  4,640
  5,054
  5,486
  5,935
  6,402
  6,887
  7,391
  7,915
  8,460
  9,026
  9,615
  10,228
  10,865
  11,529
  12,221
  12,942
  13,694
  14,478
  15,297
  16,152
  17,046
  17,980
  18,956
  19,977
  21,046
Total equity, $m
  1,578
  1,701
  1,899
  2,108
  2,327
  2,556
  2,796
  3,046
  3,306
  3,576
  3,858
  4,150
  4,454
  4,770
  5,098
  5,439
  5,794
  6,163
  6,547
  6,947
  7,364
  7,798
  8,251
  8,724
  9,218
  9,733
  10,271
  10,834
  11,422
  12,038
  12,681
Total liabilities and equity, $m
  4,087
  4,524
  5,051
  5,606
  6,189
  6,798
  7,436
  8,100
  8,792
  9,511
  10,260
  11,037
  11,845
  12,685
  13,558
  14,465
  15,409
  16,391
  17,412
  18,476
  19,585
  20,740
  21,945
  23,202
  24,515
  25,885
  27,317
  28,814
  30,378
  32,015
  33,727
Debt-to-equity ratio
  0.876
  1.000
  1.070
  1.120
  1.180
  1.220
  1.260
  1.290
  1.320
  1.340
  1.370
  1.390
  1.410
  1.420
  1.440
  1.450
  1.470
  1.480
  1.490
  1.500
  1.510
  1.520
  1.520
  1.530
  1.540
  1.540
  1.550
  1.560
  1.560
  1.570
  1.570
Adjusted equity ratio
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376
  0.376

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -160
  -323
  -367
  -414
  -463
  -514
  -567
  -623
  -681
  -742
  -805
  -870
  -938
  -1,009
  -1,082
  -1,159
  -1,238
  -1,321
  -1,406
  -1,496
  -1,589
  -1,686
  -1,787
  -1,893
  -2,003
  -2,118
  -2,239
  -2,364
  -2,496
  -2,633
  -2,777
Depreciation, amort., depletion, $m
  528
  455
  508
  564
  623
  684
  748
  815
  885
  957
  1,033
  1,111
  1,192
  1,277
  1,365
  1,456
  1,551
  1,650
  1,753
  1,860
  1,971
  2,088
  2,209
  2,335
  2,467
  2,605
  2,750
  2,900
  3,058
  3,222
  3,395
Funds from operations, $m
  518
  132
  141
  150
  160
  170
  181
  192
  203
  215
  228
  241
  254
  268
  282
  297
  313
  329
  346
  364
  382
  401
  421
  442
  464
  487
  511
  536
  562
  589
  618
Change in working capital, $m
  8
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -30
  -31
  -32
  -34
  -35
  -37
  -38
  -40
  -42
  -43
  -45
  -47
  -50
  -52
  -54
Cash from operations, $m
  510
  -1,602
  158
  168
  179
  190
  201
  213
  225
  238
  252
  265
  280
  295
  310
  326
  343
  360
  379
  398
  417
  438
  460
  482
  506
  530
  556
  583
  612
  641
  672
Maintenance CAPEX, $m
  0
  -405
  -455
  -508
  -564
  -623
  -684
  -748
  -815
  -885
  -957
  -1,033
  -1,111
  -1,192
  -1,277
  -1,365
  -1,456
  -1,551
  -1,650
  -1,753
  -1,860
  -1,971
  -2,088
  -2,209
  -2,335
  -2,467
  -2,605
  -2,750
  -2,900
  -3,058
  -3,222
New CAPEX, $m
  -341
  -251
  -265
  -279
  -293
  -307
  -321
  -334
  -348
  -362
  -377
  -391
  -407
  -423
  -439
  -457
  -475
  -494
  -514
  -535
  -558
  -581
  -606
  -633
  -660
  -690
  -721
  -753
  -787
  -824
  -862
Cash from investing activities, $m
  -353
  -656
  -720
  -787
  -857
  -930
  -1,005
  -1,082
  -1,163
  -1,247
  -1,334
  -1,424
  -1,518
  -1,615
  -1,716
  -1,822
  -1,931
  -2,045
  -2,164
  -2,288
  -2,418
  -2,552
  -2,694
  -2,842
  -2,995
  -3,157
  -3,326
  -3,503
  -3,687
  -3,882
  -4,084
Free cash flow, $m
  157
  -2,258
  -563
  -620
  -679
  -740
  -804
  -870
  -938
  -1,009
  -1,082
  -1,159
  -1,238
  -1,320
  -1,406
  -1,495
  -1,588
  -1,685
  -1,785
  -1,891
  -2,000
  -2,115
  -2,234
  -2,359
  -2,490
  -2,627
  -2,770
  -2,919
  -3,076
  -3,240
  -3,412
Issuance/(repayment) of debt, $m
  -27
  314
  329
  346
  364
  381
  397
  414
  432
  449
  467
  485
  504
  524
  545
  566
  589
  613
  638
  664
  692
  721
  752
  784
  819
  855
  893
  934
  976
  1,021
  1,068
Issuance/(repurchase) of shares, $m
  0
  2,068
  432
  482
  534
  589
  646
  705
  766
  830
  897
  966
  1,038
  1,112
  1,190
  1,270
  1,354
  1,441
  1,532
  1,627
  1,725
  1,828
  1,935
  2,048
  2,165
  2,287
  2,415
  2,548
  2,688
  2,834
  2,987
Cash from financing (excl. dividends), $m  
  -26
  2,382
  761
  828
  898
  970
  1,043
  1,119
  1,198
  1,279
  1,364
  1,451
  1,542
  1,636
  1,735
  1,836
  1,943
  2,054
  2,170
  2,291
  2,417
  2,549
  2,687
  2,832
  2,984
  3,142
  3,308
  3,482
  3,664
  3,855
  4,055
Total cash flow (excl. dividends), $m
  126
  -1,945
  -234
  -273
  -315
  -360
  -406
  -455
  -506
  -560
  -615
  -673
  -734
  -796
  -861
  -929
  -999
  -1,072
  -1,148
  -1,227
  -1,308
  -1,394
  -1,482
  -1,575
  -1,671
  -1,771
  -1,876
  -1,986
  -2,100
  -2,219
  -2,343
Retained Cash Flow (-), $m
  281
  -186
  -198
  -209
  -219
  -229
  -240
  -250
  -260
  -271
  -281
  -292
  -304
  -316
  -328
  -341
  -355
  -369
  -384
  -400
  -417
  -434
  -453
  -473
  -493
  -515
  -538
  -563
  -588
  -615
  -644
Prev. year cash balance distribution, $m
 
  63
  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
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Discount rate, %
 
  6.30
  6.62
  6.95
  7.29
  7.66
  8.04
  8.44
  8.86
  9.31
  9.77
  10.26
  10.78
  11.31
  11.88
  12.47
  13.10
  13.75
  14.44
  15.16
  15.92
  16.72
  17.55
  18.43
  19.35
  20.32
  21.33
  22.40
  23.52
  24.70
  25.93
PV of cash for 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
Current shareholders' claim on cash, %
  100
  70.5
  65.5
  60.7
  56.4
  52.3
  48.6
  45.1
  41.9
  38.9
  36.1
  33.5
  31.2
  28.9
  26.9
  25.0
  23.2
  21.6
  20.1
  18.6
  17.3
  16.1
  15.0
  13.9
  12.9
  12.0
  11.2
  10.4
  9.6
  9.0
  8.3

Vermilion Energy Inc. acquires, explores, develops, and produces crude oil and natural gas in North America, Europe, and Australia. As of December 31, 2015, it owned 71% interest in 326,500 net acres of developed land and 88% interest in 537,000 net acres of undeveloped land, as well as 464 net producing natural gas wells and 453 net producing oil wells in Canada; and 96% interest in 208,900 net acres of developed land and 100% interest in 374,600 net acres of undeveloped land in the Aquitaine and Paris Basins, as well as 337 net producing oil wells in France. The company also owned 55% interest in 814,600 net acres of land, as well as 35 net producing gas wells in the Netherlands; 7,800 net acres of developed and 153,400 net acres of undeveloped land, and 4 net producing gas wells in Germany; and 90,700 net acres of land and 4 net producing oil wells in the United States. In addition, it holds 18.5% interest in the offshore Corrib gas field situated in Ireland; and 100% interest in the Wandoo block, which consists of 59,600 acres located in Australia. Further, the company has 71,163 barrels of oil equivalent (Mboe) of total proved reserves and 121,717 Mboe of proved plus probable reserves located in Canada; 42,027 Mboe of total proved reserves and 63,612 Mboe of proved plus probable reserves situated in France; 8,122 Mboe of total proved reserves and 16,320 Mboe of proved plus probable reserves located in the Netherlands; 5,250 Mboe of total proved reserves and 8,250 Mboe of proved plus probable reserves situated in Germany; 17,637 Mboe of total proved reserves and 25,538 Mboe of proved plus probable reserves located in Ireland; 13,765 Mboe of total proved reserves and 17,465 Mboe of proved plus probable reserves located in Australia; and 2,742 Mboe of total proved reserves and 7,988 Mboe of proved plus probable reserves located in the United States. The company was founded in 1994 and is headquartered in Calgary, Canada.

FINANCIAL RATIOS  of  Vermilion Energy Inc. (VET)

Valuation Ratios
P/E Ratio -32.2
Price to Sales 6.2
Price to Book 3.3
Price to Tangible Book
Price to Cash Flow 10.1
Price to Free Cash Flow 30.5
Growth Rates
Sales Growth Rate -5.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -33.9%
Cap. Spend. - 3 Yr. Gr. Rate -9.5%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 87.6%
Total Debt to Equity 87.6%
Interest Coverage -3
Management Effectiveness
Return On Assets -2.8%
Ret/ On Assets - 3 Yr. Avg. 0.3%
Return On Total Capital -5.1%
Ret/ On T. Cap. - 3 Yr. Avg. -0.9%
Return On Equity -9.3%
Return On Equity - 3 Yr. Avg. -2%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 73.1%
Gross Margin - 3 Yr. Avg. 76.5%
EBITDA Margin 44%
EBITDA Margin - 3 Yr. Avg. 50.1%
Operating Margin -11.6%
Oper. Margin - 3 Yr. Avg. -1.7%
Pre-Tax Margin -26.9%
Pre-Tax Margin - 3 Yr. Avg. -5.6%
Net Profit Margin -19.3%
Net Profit Margin - 3 Yr. Avg. -7.9%
Effective Tax Rate 28.3%
Eff/ Tax Rate - 3 Yr. Avg. 22.5%
Payout Ratio -65.6%

VET stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the VET stock intrinsic value calculation we used $829 million for the last fiscal year's total revenue generated by Vermilion Energy Inc.. The default revenue input number comes from 2016 income statement of Vermilion Energy 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 VET stock valuation model: a) initial revenue growth rate of 12.4% 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 6.3%, whose default value for VET is calculated based on our internal credit rating of Vermilion Energy 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 Vermilion Energy 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 VET stock the variable cost ratio is equal to 128.3%.

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 VET 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 4.3% for Vermilion Energy Inc..

Corporate tax rate of 27% is the nominal tax rate for Vermilion Energy 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 VET 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 VET are equal to 244.3%.

Life of production assets of 3.8 years is the average useful life of capital assets used in Vermilion Energy 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 VET is equal to -15.4%. 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 - $1578 million for Vermilion Energy 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 118.474 million for Vermilion Energy 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 Vermilion Energy Inc. at the current share price and the inputted number of shares is $5.2 billion.


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Stock chart of VET Financial statements of VET
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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