Intrinsic value of Seven Generations Energy Ltd. class A co - VII

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$25.20

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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Previous close

$25.20

 
Intrinsic value

$2.70

 
Up/down potential

-89%

 
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 VII 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 8.9

 

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, %
  132.21
  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
  1,240
  1,984
  3,065
  4,584
  6,651
  9,384
  12,901
  17,317
  22,738
  29,258
  36,956
  45,891
  56,106
  67,626
  80,462
  94,609
  110,053
  126,772
  144,738
  163,924
  184,299
  205,837
  228,517
  252,319
  277,235
  303,260
  330,396
  358,657
  388,061
  418,634
  450,411
Variable operating expenses, $m
 
  1,393
  2,152
  3,218
  4,669
  6,588
  9,056
  12,156
  15,962
  20,539
  25,943
  32,215
  39,386
  47,474
  56,484
  66,415
  77,257
  88,994
  101,606
  115,074
  129,378
  144,498
  160,419
  177,128
  194,619
  212,888
  231,938
  251,777
  272,419
  293,881
  316,188
Fixed operating expenses, $m
 
  112
  115
  117
  120
  123
  126
  130
  133
  136
  140
  143
  147
  150
  154
  158
  162
  166
  170
  174
  179
  183
  188
  192
  197
  202
  207
  212
  218
  223
  229
Total operating expenses, $m
  977
  1,505
  2,267
  3,335
  4,789
  6,711
  9,182
  12,286
  16,095
  20,675
  26,083
  32,358
  39,533
  47,624
  56,638
  66,573
  77,419
  89,160
  101,776
  115,248
  129,557
  144,681
  160,607
  177,320
  194,816
  213,090
  232,145
  251,989
  272,637
  294,104
  316,417
Operating income, $m
  263
  480
  799
  1,249
  1,862
  2,673
  3,718
  5,031
  6,643
  8,583
  10,873
  13,532
  16,573
  20,002
  23,824
  28,036
  32,634
  37,612
  42,962
  48,675
  54,742
  61,156
  67,910
  74,999
  82,419
  90,169
  98,251
  106,668
  115,425
  124,530
  133,994
EBITDA, $m
  747
  1,250
  1,989
  3,029
  4,445
  6,318
  8,728
  11,756
  15,474
  19,946
  25,226
  31,355
  38,363
  46,266
  55,073
  64,779
  75,375
  86,846
  99,174
  112,338
  126,319
  141,097
  156,659
  172,992
  190,089
  207,946
  226,567
  245,959
  266,136
  287,114
  308,919
Interest expense (income), $m
  140
  163
  290
  476
  738
  1,094
  1,564
  2,169
  2,930
  3,863
  4,985
  6,310
  7,848
  9,607
  11,590
  13,799
  16,235
  18,893
  21,771
  24,864
  28,166
  31,674
  35,381
  39,285
  43,383
  47,672
  52,152
  56,823
  61,688
  66,749
  72,012
Earnings before tax, $m
  -34
  317
  509
  772
  1,124
  1,580
  2,154
  2,861
  3,714
  4,720
  5,888
  7,222
  8,725
  10,396
  12,234
  14,236
  16,399
  18,719
  21,191
  23,811
  26,576
  29,483
  32,529
  35,713
  39,036
  42,498
  46,099
  49,845
  53,737
  57,781
  61,982
Tax expense, $m
  -8
  86
  137
  209
  303
  426
  582
  773
  1,003
  1,274
  1,590
  1,950
  2,356
  2,807
  3,303
  3,844
  4,428
  5,054
  5,722
  6,429
  7,176
  7,960
  8,783
  9,643
  10,540
  11,474
  12,447
  13,458
  14,509
  15,601
  16,735
Net income, $m
  -26
  231
  371
  564
  821
  1,153
  1,572
  2,089
  2,711
  3,446
  4,298
  5,272
  6,369
  7,589
  8,931
  10,392
  11,972
  13,665
  15,469
  17,382
  19,401
  21,522
  23,746
  26,071
  28,496
  31,023
  33,653
  36,387
  39,228
  42,180
  45,247

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  631
  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
  6,602
  9,538
  14,737
  22,039
  31,978
  45,116
  62,024
  83,254
  109,318
  140,665
  177,672
  220,628
  269,739
  325,126
  386,836
  454,850
  529,100
  609,479
  695,857
  788,095
  886,052
  989,603
  1,098,638
  1,213,074
  1,332,861
  1,457,978
  1,588,445
  1,724,314
  1,865,677
  2,012,663
  2,165,435
Adjusted assets (=assets-cash), $m
  5,971
  9,538
  14,737
  22,039
  31,978
  45,116
  62,024
  83,254
  109,318
  140,665
  177,672
  220,628
  269,739
  325,126
  386,836
  454,850
  529,100
  609,479
  695,857
  788,095
  886,052
  989,603
  1,098,638
  1,213,074
  1,332,861
  1,457,978
  1,588,445
  1,724,314
  1,865,677
  2,012,663
  2,165,435
Revenue / Adjusted assets
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
Average production assets, $m
  4,430
  7,089
  10,952
  16,379
  23,765
  33,529
  46,095
  61,873
  81,243
  104,540
  132,043
  163,967
  200,466
  241,629
  287,490
  338,038
  393,219
  452,955
  517,150
  585,699
  658,500
  735,457
  816,490
  901,537
  990,561
  1,083,546
  1,180,507
  1,281,482
  1,386,541
  1,495,779
  1,609,317
Working capital, $m
  514
  -186
  -288
  -431
  -625
  -882
  -1,213
  -1,628
  -2,137
  -2,750
  -3,474
  -4,314
  -5,274
  -6,357
  -7,563
  -8,893
  -10,345
  -11,917
  -13,605
  -15,409
  -17,324
  -19,349
  -21,481
  -23,718
  -26,060
  -28,506
  -31,057
  -33,714
  -36,478
  -39,352
  -42,339
Total debt, $m
  2,112
  3,768
  6,186
  9,581
  14,203
  20,312
  28,174
  38,046
  50,166
  64,742
  81,950
  101,925
  124,762
  150,517
  179,212
  210,838
  245,365
  282,741
  322,907
  365,797
  411,347
  459,498
  510,199
  563,413
  619,113
  677,293
  737,960
  801,139
  866,873
  935,221
  1,006,260
Total liabilities, $m
  2,780
  4,435
  6,853
  10,248
  14,870
  20,979
  28,841
  38,713
  50,833
  65,409
  82,617
  102,592
  125,429
  151,184
  179,879
  211,505
  246,032
  283,408
  323,574
  366,464
  412,014
  460,165
  510,866
  564,080
  619,780
  677,960
  738,627
  801,806
  867,540
  935,888
  1,006,927
Total equity, $m
  3,823
  5,103
  7,884
  11,791
  17,108
  24,137
  33,183
  44,541
  58,485
  75,256
  95,054
  118,036
  144,310
  173,943
  206,957
  243,345
  283,069
  326,071
  372,284
  421,631
  474,038
  529,437
  587,771
  648,995
  713,080
  780,018
  849,818
  922,508
  998,137
  1,076,775
  1,158,508
Total liabilities and equity, $m
  6,603
  9,538
  14,737
  22,039
  31,978
  45,116
  62,024
  83,254
  109,318
  140,665
  177,671
  220,628
  269,739
  325,127
  386,836
  454,850
  529,101
  609,479
  695,858
  788,095
  886,052
  989,602
  1,098,637
  1,213,075
  1,332,860
  1,457,978
  1,588,445
  1,724,314
  1,865,677
  2,012,663
  2,165,435
Debt-to-equity ratio
  0.552
  0.740
  0.780
  0.810
  0.830
  0.840
  0.850
  0.850
  0.860
  0.860
  0.860
  0.860
  0.860
  0.870
  0.870
  0.870
  0.870
  0.870
  0.870
  0.870
  0.870
  0.870
  0.870
  0.870
  0.870
  0.870
  0.870
  0.870
  0.870
  0.870
  0.870
Adjusted equity ratio
  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
  0.535
  0.535

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -26
  231
  371
  564
  821
  1,153
  1,572
  2,089
  2,711
  3,446
  4,298
  5,272
  6,369
  7,589
  8,931
  10,392
  11,972
  13,665
  15,469
  17,382
  19,401
  21,522
  23,746
  26,071
  28,496
  31,023
  33,653
  36,387
  39,228
  42,180
  45,247
Depreciation, amort., depletion, $m
  484
  771
  1,190
  1,780
  2,583
  3,644
  5,010
  6,725
  8,831
  11,363
  14,352
  17,823
  21,790
  26,264
  31,249
  36,743
  42,741
  49,234
  56,212
  63,663
  71,576
  79,941
  88,749
  97,993
  107,670
  117,777
  128,316
  139,292
  150,711
  162,585
  174,926
Funds from operations, $m
  557
  1,002
  1,562
  2,344
  3,404
  4,798
  6,583
  8,814
  11,542
  14,809
  18,651
  23,095
  28,159
  33,853
  40,180
  47,136
  54,713
  62,899
  71,681
  81,045
  90,977
  101,463
  112,495
  124,064
  136,166
  148,800
  161,969
  175,678
  189,939
  204,765
  220,172
Change in working capital, $m
  -88
  -70
  -102
  -143
  -194
  -257
  -331
  -415
  -510
  -613
  -724
  -840
  -960
  -1,083
  -1,207
  -1,330
  -1,452
  -1,572
  -1,689
  -1,803
  -1,915
  -2,025
  -2,132
  -2,237
  -2,342
  -2,446
  -2,551
  -2,657
  -2,764
  -2,874
  -2,987
Cash from operations, $m
  645
  2,392
  1,664
  2,487
  3,598
  5,054
  6,913
  9,229
  12,051
  15,422
  19,374
  23,935
  29,119
  34,936
  41,386
  48,466
  56,164
  64,471
  73,370
  82,849
  92,892
  103,488
  114,627
  126,302
  138,508
  151,246
  164,519
  178,335
  192,703
  207,638
  223,159
Maintenance CAPEX, $m
  0
  -482
  -771
  -1,190
  -1,780
  -2,583
  -3,644
  -5,010
  -6,725
  -8,831
  -11,363
  -14,352
  -17,823
  -21,790
  -26,264
  -31,249
  -36,743
  -42,741
  -49,234
  -56,212
  -63,663
  -71,576
  -79,941
  -88,749
  -97,993
  -107,670
  -117,777
  -128,316
  -139,292
  -150,711
  -162,585
New CAPEX, $m
  -978
  -2,659
  -3,863
  -5,427
  -7,386
  -9,764
  -12,566
  -15,778
  -19,370
  -23,297
  -27,503
  -31,924
  -36,498
  -41,163
  -45,862
  -50,547
  -55,181
  -59,736
  -64,195
  -68,549
  -72,801
  -76,957
  -81,033
  -85,048
  -89,023
  -92,985
  -96,960
  -100,976
  -105,059
  -109,237
  -113,538
Cash from investing activities, $m
  -1,478
  -3,141
  -4,634
  -6,617
  -9,166
  -12,347
  -16,210
  -20,788
  -26,095
  -32,128
  -38,866
  -46,276
  -54,321
  -62,953
  -72,126
  -81,796
  -91,924
  -102,477
  -113,429
  -124,761
  -136,464
  -148,533
  -160,974
  -173,797
  -187,016
  -200,655
  -214,737
  -229,292
  -244,351
  -259,948
  -276,123
Free cash flow, $m
  -833
  -749
  -2,970
  -4,130
  -5,568
  -7,293
  -9,297
  -11,559
  -14,044
  -16,706
  -19,491
  -22,342
  -25,202
  -28,017
  -30,740
  -33,331
  -35,760
  -38,007
  -40,059
  -41,913
  -43,572
  -45,045
  -46,347
  -47,495
  -48,508
  -49,409
  -50,218
  -50,957
  -51,648
  -52,310
  -52,963
Issuance/(repayment) of debt, $m
  0
  1,656
  2,417
  3,395
  4,621
  6,109
  7,862
  9,872
  12,120
  14,577
  17,208
  19,975
  22,837
  25,755
  28,695
  31,627
  34,526
  37,376
  40,166
  42,890
  45,550
  48,151
  50,701
  53,213
  55,701
  58,180
  60,667
  63,179
  65,734
  68,348
  71,039
Issuance/(repurchase) of shares, $m
  1,103
  372
  3,334
  4,641
  6,264
  8,212
  10,480
  13,045
  15,869
  18,901
  22,082
  25,349
  28,640
  31,894
  35,059
  38,092
  40,958
  43,633
  46,105
  48,369
  50,429
  52,294
  53,980
  55,505
  56,894
  58,167
  59,350
  60,468
  61,543
  62,599
  63,657
Cash from financing (excl. dividends), $m  
  1,060
  2,028
  5,751
  8,036
  10,885
  14,321
  18,342
  22,917
  27,989
  33,478
  39,290
  45,324
  51,477
  57,649
  63,754
  69,719
  75,484
  81,009
  86,271
  91,259
  95,979
  100,445
  104,681
  108,718
  112,595
  116,347
  120,017
  123,647
  127,277
  130,947
  134,696
Total cash flow (excl. dividends), $m
  226
  908
  -553
  -735
  -947
  -1,184
  -1,435
  -1,687
  -1,925
  -2,130
  -2,283
  -2,368
  -2,365
  -2,262
  -2,044
  -1,704
  -1,234
  -631
  107
  978
  1,979
  3,106
  4,354
  5,718
  7,192
  8,771
  10,449
  12,222
  14,086
  16,038
  18,076
Retained Cash Flow (-), $m
  -2,036
  -1,911
  -2,781
  -3,907
  -5,317
  -7,029
  -9,046
  -11,358
  -13,944
  -16,771
  -19,798
  -22,982
  -26,274
  -29,632
  -33,015
  -36,388
  -39,724
  -43,003
  -46,212
  -49,347
  -52,407
  -55,399
  -58,334
  -61,224
  -64,086
  -66,938
  -69,799
  -72,690
  -75,629
  -78,637
  -81,733
Prev. year cash balance distribution, $m
 
  631
  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, %
 
  4.70
  4.94
  5.18
  5.44
  5.71
  6.00
  6.30
  6.61
  6.94
  7.29
  7.66
  8.04
  8.44
  8.86
  9.31
  9.77
  10.26
  10.77
  11.31
  11.88
  12.47
  13.09
  13.75
  14.44
  15.16
  15.92
  16.71
  17.55
  18.42
  19.35
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
  95.2
  74.4
  59.4
  48.3
  40.1
  33.8
  28.9
  25.1
  22.0
  19.6
  17.6
  15.9
  14.5
  13.4
  12.4
  11.6
  10.8
  10.2
  9.7
  9.2
  8.8
  8.4
  8.1
  7.8
  7.5
  7.3
  7.1
  6.9
  6.7
  6.5

Seven Generations Energy Ltd., an independent petroleum company, focuses on the acquisition, exploration, development, and production of oil and natural gas properties in western Canada. The company holds interests in the Kakwa River project, a natural gas property covering 431,200 net acres located in the Kakwa area of northwest Alberta. As of December 31, 2015, it had gross proved plus probable reserves of 859.1 million barrels of oil equivalent. Seven Generations Energy Ltd. was founded in 2001 and is headquartered in Calgary, Canada.

FINANCIAL RATIOS  of  Seven Generations Energy Ltd. class A co (VII)

Valuation Ratios
P/E Ratio -339.5
Price to Sales 7.1
Price to Book 2.3
Price to Tangible Book
Price to Cash Flow 13.7
Price to Free Cash Flow -26.5
Growth Rates
Sales Growth Rate 132.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -25.3%
Cap. Spend. - 3 Yr. Gr. Rate 11.2%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 55.2%
Total Debt to Equity 55.2%
Interest Coverage 1
Management Effectiveness
Return On Assets 1.6%
Ret/ On Assets - 3 Yr. Avg. 2.8%
Return On Total Capital -0.6%
Ret/ On T. Cap. - 3 Yr. Avg. 0.2%
Return On Equity -0.9%
Return On Equity - 3 Yr. Avg. -0.2%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 47.6%
EBITDA Margin - 3 Yr. Avg. 61.5%
Operating Margin 21.2%
Oper. Margin - 3 Yr. Avg. 24.7%
Pre-Tax Margin -2.7%
Pre-Tax Margin - 3 Yr. Avg. 6.2%
Net Profit Margin -2.1%
Net Profit Margin - 3 Yr. Avg. -2.4%
Effective Tax Rate 23.5%
Eff/ Tax Rate - 3 Yr. Avg. 2.4%
Payout Ratio 0%

VII stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the VII stock intrinsic value calculation we used $1240 million for the last fiscal year's total revenue generated by Seven Generations Energy Ltd. class A co. The default revenue input number comes from 2016 income statement of Seven Generations Energy Ltd. class A co. 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 VII 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 4.7%, whose default value for VII is calculated based on our internal credit rating of Seven Generations Energy Ltd. class A co, 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 Seven Generations Energy Ltd. class A co.
    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 VII stock the variable cost ratio is equal to 70.2%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $109 million in the base year in the intrinsic value calculation for VII 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 7.7% for Seven Generations Energy Ltd. class A co.

Corporate tax rate of 27% is the nominal tax rate for Seven Generations Energy Ltd. class A co. 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 VII 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 VII are equal to 357.3%.

Life of production assets of 9.2 years is the average useful life of capital assets used in Seven Generations Energy Ltd. class A co 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 VII is equal to -9.4%. 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 - $3823 million for Seven Generations Energy Ltd. class A co - 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 353.469 million for Seven Generations Energy Ltd. class A co 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 Seven Generations Energy Ltd. class A co at the current share price and the inputted number of shares is $8.9 billion.


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Stock chart of VII Financial statements of VII
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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