Intrinsic value of Ardmore Shipping - ASC

Previous Close

$7.90

  Intrinsic Value

$3.10

stock screener

  Rating & Target

str. sell

-61%

  Value-price divergence*

+28%

Previous close

$7.90

 
Intrinsic value

$3.10

 
Up/down potential

-61%

 
Rating

str. sell

 
Value-price divergence*

+28%

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

We calculate the intrinsic value of ASC 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 0.3

 

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, %
  3.80
  3.80
  3.92
  4.03
  4.13
  4.21
  4.29
  4.36
  4.43
  4.48
  4.54
  4.58
  4.62
  4.66
  4.69
  4.73
  4.75
  4.78
  4.80
  4.82
  4.84
  4.85
  4.87
  4.88
  4.89
  4.90
  4.91
  4.92
  4.93
  4.94
  4.94
Revenue, $m
  164
  170
  177
  184
  192
  200
  208
  217
  227
  237
  248
  259
  271
  284
  297
  311
  326
  342
  358
  375
  393
  413
  433
  454
  476
  499
  524
  550
  577
  605
  635
Variable operating expenses, $m
 
  123
  127
  133
  138
  144
  150
  156
  163
  171
  178
  187
  195
  204
  214
  224
  235
  246
  258
  270
  283
  297
  311
  327
  343
  359
  377
  396
  415
  436
  457
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
  140
  123
  127
  133
  138
  144
  150
  156
  163
  171
  178
  187
  195
  204
  214
  224
  235
  246
  258
  270
  283
  297
  311
  327
  343
  359
  377
  396
  415
  436
  457
Operating income, $m
  24
  48
  50
  52
  54
  56
  58
  61
  64
  66
  69
  73
  76
  79
  83
  87
  91
  96
  100
  105
  110
  116
  121
  127
  133
  140
  147
  154
  161
  169
  178
EBITDA, $m
  54
  79
  82
  85
  89
  92
  96
  101
  105
  110
  115
  120
  126
  131
  138
  144
  151
  158
  166
  174
  182
  191
  200
  210
  220
  231
  242
  254
  267
  280
  294
Interest expense (income), $m
  13
  15
  15
  16
  17
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  30
  31
  33
  34
  36
  38
  40
  42
  44
  46
  48
  51
  53
  56
Earnings before tax, $m
  4
  33
  34
  36
  37
  39
  40
  42
  44
  46
  48
  50
  52
  55
  57
  60
  63
  66
  69
  72
  76
  79
  83
  87
  91
  96
  101
  106
  111
  116
  122
Tax expense, $m
  0
  9
  9
  10
  10
  10
  11
  11
  12
  12
  13
  14
  14
  15
  15
  16
  17
  18
  19
  20
  20
  21
  22
  24
  25
  26
  27
  28
  30
  31
  33
Net income, $m
  4
  24
  25
  26
  27
  28
  29
  31
  32
  33
  35
  37
  38
  40
  42
  44
  46
  48
  50
  53
  55
  58
  61
  64
  67
  70
  73
  77
  81
  85
  89

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  56
  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
  884
  860
  893
  929
  968
  1,009
  1,052
  1,098
  1,146
  1,198
  1,252
  1,309
  1,370
  1,434
  1,501
  1,572
  1,647
  1,725
  1,808
  1,895
  1,987
  2,084
  2,185
  2,292
  2,404
  2,522
  2,646
  2,776
  2,913
  3,056
  3,208
Adjusted assets (=assets-cash), $m
  828
  860
  893
  929
  968
  1,009
  1,052
  1,098
  1,146
  1,198
  1,252
  1,309
  1,370
  1,434
  1,501
  1,572
  1,647
  1,725
  1,808
  1,895
  1,987
  2,084
  2,185
  2,292
  2,404
  2,522
  2,646
  2,776
  2,913
  3,056
  3,208
Revenue / Adjusted assets
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
Average production assets, $m
  723
  750
  779
  811
  844
  880
  917
  957
  1,000
  1,045
  1,092
  1,142
  1,195
  1,251
  1,309
  1,371
  1,436
  1,505
  1,577
  1,653
  1,733
  1,817
  1,906
  1,999
  2,097
  2,199
  2,307
  2,421
  2,540
  2,666
  2,798
Working capital, $m
  35
  22
  23
  24
  25
  26
  27
  28
  29
  30
  32
  33
  35
  36
  38
  40
  42
  44
  46
  48
  50
  53
  55
  58
  61
  64
  67
  70
  74
  77
  81
Total debt, $m
  462
  437
  455
  474
  494
  516
  538
  563
  588
  616
  644
  675
  707
  740
  776
  814
  853
  895
  939
  985
  1,033
  1,084
  1,138
  1,194
  1,254
  1,316
  1,382
  1,450
  1,523
  1,599
  1,679
Total liabilities, $m
  479
  455
  473
  492
  512
  534
  556
  581
  606
  634
  662
  693
  725
  758
  794
  832
  871
  913
  957
  1,003
  1,051
  1,102
  1,156
  1,212
  1,272
  1,334
  1,400
  1,468
  1,541
  1,617
  1,697
Total equity, $m
  404
  405
  421
  438
  456
  475
  495
  517
  540
  564
  590
  617
  645
  675
  707
  740
  776
  813
  852
  893
  936
  981
  1,029
  1,079
  1,132
  1,188
  1,246
  1,307
  1,372
  1,440
  1,511
Total liabilities and equity, $m
  883
  860
  894
  930
  968
  1,009
  1,051
  1,098
  1,146
  1,198
  1,252
  1,310
  1,370
  1,433
  1,501
  1,572
  1,647
  1,726
  1,809
  1,896
  1,987
  2,083
  2,185
  2,291
  2,404
  2,522
  2,646
  2,775
  2,913
  3,057
  3,208
Debt-to-equity ratio
  1.144
  1.080
  1.080
  1.080
  1.080
  1.090
  1.090
  1.090
  1.090
  1.090
  1.090
  1.090
  1.100
  1.100
  1.100
  1.100
  1.100
  1.100
  1.100
  1.100
  1.100
  1.100
  1.110
  1.110
  1.110
  1.110
  1.110
  1.110
  1.110
  1.110
  1.110
Adjusted equity ratio
  0.420
  0.471
  0.471
  0.471
  0.471
  0.471
  0.471
  0.471
  0.471
  0.471
  0.471
  0.471
  0.471
  0.471
  0.471
  0.471
  0.471
  0.471
  0.471
  0.471
  0.471
  0.471
  0.471
  0.471
  0.471
  0.471
  0.471
  0.471
  0.471
  0.471
  0.471

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  4
  24
  25
  26
  27
  28
  29
  31
  32
  33
  35
  37
  38
  40
  42
  44
  46
  48
  50
  53
  55
  58
  61
  64
  67
  70
  73
  77
  81
  85
  89
Depreciation, amort., depletion, $m
  30
  31
  32
  34
  35
  37
  38
  40
  41
  43
  45
  47
  50
  52
  54
  57
  60
  62
  65
  69
  72
  75
  79
  83
  87
  91
  96
  100
  105
  111
  116
Funds from operations, $m
  42
  55
  57
  60
  62
  65
  67
  70
  74
  77
  80
  84
  88
  92
  96
  101
  105
  110
  116
  121
  127
  133
  140
  147
  154
  161
  169
  178
  186
  195
  205
Change in working capital, $m
  -1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  4
  4
Cash from operations, $m
  43
  54
  56
  59
  61
  64
  66
  69
  72
  75
  79
  82
  86
  90
  94
  99
  104
  108
  114
  119
  125
  131
  137
  144
  151
  158
  166
  174
  183
  192
  201
Maintenance CAPEX, $m
  0
  -30
  -31
  -32
  -34
  -35
  -37
  -38
  -40
  -41
  -43
  -45
  -47
  -50
  -52
  -54
  -57
  -60
  -62
  -65
  -69
  -72
  -75
  -79
  -83
  -87
  -91
  -96
  -100
  -105
  -111
New CAPEX, $m
  -174
  -27
  -29
  -31
  -33
  -36
  -38
  -40
  -42
  -45
  -47
  -50
  -53
  -56
  -59
  -62
  -65
  -69
  -72
  -76
  -80
  -84
  -88
  -93
  -98
  -103
  -108
  -114
  -119
  -125
  -132
Cash from investing activities, $m
  -122
  -57
  -60
  -63
  -67
  -71
  -75
  -78
  -82
  -86
  -90
  -95
  -100
  -106
  -111
  -116
  -122
  -129
  -134
  -141
  -149
  -156
  -163
  -172
  -181
  -190
  -199
  -210
  -219
  -230
  -243
Free cash flow, $m
  -79
  -3
  -4
  -5
  -6
  -7
  -8
  -9
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -20
  -21
  -22
  -24
  -25
  -27
  -28
  -30
  -32
  -33
  -35
  -37
  -39
  -41
Issuance/(repayment) of debt, $m
  50
  17
  18
  19
  20
  22
  23
  24
  26
  27
  29
  30
  32
  34
  36
  38
  40
  42
  44
  46
  49
  51
  54
  56
  59
  62
  66
  69
  72
  76
  80
Issuance/(repurchase) of shares, $m
  61
  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 from financing (excl. dividends), $m  
  105
  17
  18
  19
  20
  22
  23
  24
  26
  27
  29
  30
  32
  34
  36
  38
  40
  42
  44
  46
  49
  51
  54
  56
  59
  62
  66
  69
  72
  76
  80
Total cash flow (excl. dividends), $m
  25
  14
  14
  14
  14
  15
  15
  15
  16
  16
  17
  17
  18
  19
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  31
  32
  34
  35
  37
  39
Retained Cash Flow (-), $m
  -56
  -15
  -16
  -17
  -18
  -19
  -20
  -22
  -23
  -24
  -26
  -27
  -29
  -30
  -32
  -33
  -35
  -37
  -39
  -41
  -43
  -45
  -48
  -50
  -53
  -56
  -58
  -61
  -64
  -68
  -71
Prev. year cash balance distribution, $m
 
  14
  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
 
  13
  -2
  -3
  -4
  -5
  -5
  -6
  -7
  -8
  -9
  -10
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -20
  -21
  -22
  -23
  -25
  -26
  -28
  -29
  -31
  -32
Discount rate, %
 
  8.50
  8.93
  9.37
  9.84
  10.33
  10.85
  11.39
  11.96
  12.56
  13.19
  13.85
  14.54
  15.26
  16.03
  16.83
  17.67
  18.55
  19.48
  20.46
  21.48
  22.55
  23.68
  24.86
  26.11
  27.41
  28.78
  30.22
  31.73
  33.32
  34.99
PV of cash for distribution, $m
 
  12
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -2
  -2
  -2
  -2
  -1
  -1
  -1
  -1
  -1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Ardmore Shipping Corporation engages in the seaborne transportation of petroleum products and chemicals through product and chemical tankers worldwide. As of December 31, 2015, the company operated 24 vessels. It serves oil majors, oil companies, oil and chemical traders, and chemical companies. The company was founded in 2010 and is based in Hamilton, Bermuda.

FINANCIAL RATIOS  of  Ardmore Shipping (ASC)

Valuation Ratios
P/E Ratio 65.4
Price to Sales 1.6
Price to Book 0.6
Price to Tangible Book
Price to Cash Flow 6.1
Price to Free Cash Flow -2
Growth Rates
Sales Growth Rate 3.8%
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 3.7%
Financial Strength
Quick Ratio 1
Current Ratio 0.1
LT Debt to Equity 104%
Total Debt to Equity 114.4%
Interest Coverage 1
Management Effectiveness
Return On Assets 2%
Ret/ On Assets - 3 Yr. Avg. 3.5%
Return On Total Capital 0.5%
Ret/ On T. Cap. - 3 Yr. Avg. 1.9%
Return On Equity 1.1%
Return On Equity - 3 Yr. Avg. 3.8%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 43.3%
Gross Margin - 3 Yr. Avg. 46.9%
EBITDA Margin 28.7%
EBITDA Margin - 3 Yr. Avg. 35.6%
Operating Margin 14.6%
Oper. Margin - 3 Yr. Avg. 16.6%
Pre-Tax Margin 2.4%
Pre-Tax Margin - 3 Yr. Avg. 8.6%
Net Profit Margin 2.4%
Net Profit Margin - 3 Yr. Avg. 8.6%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio 225%

ASC stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ASC stock intrinsic value calculation we used $164 million for the last fiscal year's total revenue generated by Ardmore Shipping. The default revenue input number comes from 2016 income statement of Ardmore Shipping. 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 ASC stock valuation model: a) initial revenue growth rate of 3.8% 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 8.5%, whose default value for ASC is calculated based on our internal credit rating of Ardmore Shipping, 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 Ardmore Shipping.
    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 ASC stock the variable cost ratio is equal to 72%.

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 ASC 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 Ardmore Shipping.

Corporate tax rate of 27% is the nominal tax rate for Ardmore Shipping. 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 ASC 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 ASC are equal to 440.5%.

Life of production assets of 24.1 years is the average useful life of capital assets used in Ardmore Shipping 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 ASC is equal to 12.8%. 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 - $404 million for Ardmore Shipping - 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 32.54 million for Ardmore Shipping 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 Ardmore Shipping at the current share price and the inputted number of shares is $0.3 billion.

RELATED COMPANIES Price Int.Val. Rating
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DHT DHT Holdings 4.15 7.79  str.buy
NAT Nordic America 6.21 3.82  sell
TGP Teekay LNG Par 17.30 5.37  str.sell
GMLP Golar LNG Part 21.23 14.42  sell
GLNG Golar LNG 23.64 4.59  str.sell

COMPANY NEWS

▶ Ardmore Shipping reports 1Q loss   [May-03-17 08:41AM  Associated Press]
▶ Ardmore Shipping reports 4Q loss   [Feb-07-17 08:47AM  Associated Press]
▶ Hedge Funds Are Betting On Ardmore Shipping Corp (ASC)   [Dec-12-16 09:48AM  at Insider Monkey]
▶ [$$] Colonial Pipeline's Brief Trading Bonanza   [Nov-01-16 04:41PM  at The Wall Street Journal]
▶ [$$] Two Picks in Tankers Ready to Shape Up   [Jul-20-16 11:24AM  at Barrons.com]
▶ Ardmore Shipping Corp Sinks on a Discounted Stock Offering   [Jun-08-16 04:06PM  at Motley Fool]
▶ Why U.K. Retailers Are Retreating From Asia   [Apr-12-16 09:33AM  at The Wall Street Journal]
▶ Is Off-Price Overtaking Department Stores In Europe?   [Apr-11-16 12:25PM  at Forbes]
▶ [$$] Euronav Is the One Tanker to Be Long In   [Mar-22-16 02:52PM  at Barrons.com]
▶ Ardmore Shipping Announces Additional Debt Refinancing   [Feb-10-16 08:30AM  PR Newswire]
▶ Energy Stocks Plunge Again This Week   [Feb-05-16 04:05PM  at Motley Fool]
▶ Don't Miss the Boat on Oil Shippers   [Jan-28-16 11:57AM  at TheStreet]
▶ Ardmore Shipping Announces Successful Refinancing   [Jan-14-16 08:30AM  PR Newswire]
Stock chart of ASC Financial statements of ASC Annual reports of ASC
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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