Intrinsic value of Atwood Oceanics - ATW

Previous Close

$9.32

  Intrinsic Value

$10.16

stock screener

  Rating & Target

hold

+9%

  Value-price divergence*

+20%

Previous close

$9.32

 
Intrinsic value

$10.16

 
Up/down potential

+9%

 
Rating

hold

 
Value-price divergence*

+20%

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

We calculate the intrinsic value of ATW 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 0.7

 

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, %
  -26.86
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  1,021
  1,041
  1,065
  1,093
  1,123
  1,158
  1,195
  1,236
  1,280
  1,327
  1,378
  1,433
  1,491
  1,553
  1,618
  1,688
  1,762
  1,840
  1,923
  2,011
  2,103
  2,201
  2,304
  2,412
  2,526
  2,646
  2,773
  2,906
  3,046
  3,194
  3,349
Variable operating expenses, $m
 
  575
  588
  603
  620
  639
  660
  682
  706
  733
  761
  791
  823
  857
  893
  932
  973
  1,016
  1,062
  1,110
  1,161
  1,215
  1,272
  1,331
  1,394
  1,461
  1,531
  1,604
  1,682
  1,763
  1,849
Fixed operating expenses, $m
 
  97
  100
  102
  105
  107
  110
  113
  116
  119
  122
  125
  128
  131
  134
  138
  141
  145
  148
  152
  156
  160
  164
  168
  172
  176
  181
  185
  190
  194
  199
Total operating expenses, $m
  657
  672
  688
  705
  725
  746
  770
  795
  822
  852
  883
  916
  951
  988
  1,027
  1,070
  1,114
  1,161
  1,210
  1,262
  1,317
  1,375
  1,436
  1,499
  1,566
  1,637
  1,712
  1,789
  1,872
  1,957
  2,048
Operating income, $m
  363
  369
  377
  387
  398
  411
  425
  441
  458
  476
  496
  517
  540
  565
  591
  619
  648
  680
  713
  749
  787
  826
  868
  913
  960
  1,009
  1,062
  1,117
  1,175
  1,236
  1,301
EBITDA, $m
  532
  541
  554
  568
  584
  602
  623
  645
  669
  695
  723
  754
  786
  821
  858
  898
  940
  984
  1,031
  1,081
  1,134
  1,190
  1,249
  1,311
  1,377
  1,447
  1,520
  1,597
  1,679
  1,764
  1,855
Interest expense (income), $m
  68
  58
  59
  60
  62
  64
  66
  68
  71
  73
  76
  79
  83
  86
  90
  94
  98
  103
  107
  112
  118
  123
  129
  135
  142
  149
  156
  164
  172
  180
  189
Earnings before tax, $m
  313
  311
  318
  327
  336
  347
  359
  372
  387
  403
  419
  438
  457
  478
  501
  525
  550
  577
  606
  637
  669
  703
  739
  778
  818
  861
  906
  953
  1,004
  1,056
  1,112
Tax expense, $m
  48
  84
  86
  88
  91
  94
  97
  101
  104
  109
  113
  118
  124
  129
  135
  142
  149
  156
  164
  172
  181
  190
  200
  210
  221
  232
  245
  257
  271
  285
  300
Net income, $m
  265
  227
  232
  239
  246
  253
  262
  272
  282
  294
  306
  320
  334
  349
  366
  383
  402
  422
  443
  465
  488
  513
  540
  568
  597
  628
  661
  696
  733
  771
  812

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  145
  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
  4,540
  4,489
  4,592
  4,710
  4,843
  4,989
  5,151
  5,326
  5,516
  5,720
  5,940
  6,175
  6,425
  6,692
  6,976
  7,277
  7,596
  7,933
  8,290
  8,667
  9,066
  9,486
  9,929
  10,396
  10,888
  11,407
  11,952
  12,527
  13,131
  13,767
  14,436
Adjusted assets (=assets-cash), $m
  4,395
  4,489
  4,592
  4,710
  4,843
  4,989
  5,151
  5,326
  5,516
  5,720
  5,940
  6,175
  6,425
  6,692
  6,976
  7,277
  7,596
  7,933
  8,290
  8,667
  9,066
  9,486
  9,929
  10,396
  10,888
  11,407
  11,952
  12,527
  13,131
  13,767
  14,436
Revenue / Adjusted assets
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
  0.232
Average production assets, $m
  4,150
  4,233
  4,331
  4,442
  4,567
  4,705
  4,857
  5,023
  5,202
  5,395
  5,602
  5,823
  6,060
  6,311
  6,579
  6,863
  7,163
  7,482
  7,818
  8,174
  8,550
  8,946
  9,364
  9,804
  10,268
  10,757
  11,272
  11,814
  12,384
  12,984
  13,614
Working capital, $m
  344
  203
  208
  213
  219
  226
  233
  241
  250
  259
  269
  279
  291
  303
  316
  329
  344
  359
  375
  392
  410
  429
  449
  470
  493
  516
  541
  567
  594
  623
  653
Total debt, $m
  1,228
  1,256
  1,286
  1,322
  1,361
  1,405
  1,453
  1,505
  1,562
  1,623
  1,688
  1,758
  1,833
  1,912
  1,997
  2,086
  2,181
  2,282
  2,388
  2,501
  2,620
  2,745
  2,877
  3,016
  3,163
  3,317
  3,480
  3,651
  3,831
  4,021
  4,220
Total liabilities, $m
  1,309
  1,338
  1,368
  1,404
  1,443
  1,487
  1,535
  1,587
  1,644
  1,705
  1,770
  1,840
  1,915
  1,994
  2,079
  2,168
  2,263
  2,364
  2,470
  2,583
  2,702
  2,827
  2,959
  3,098
  3,245
  3,399
  3,562
  3,733
  3,913
  4,103
  4,302
Total equity, $m
  3,230
  3,151
  3,224
  3,307
  3,400
  3,503
  3,616
  3,739
  3,872
  4,016
  4,170
  4,335
  4,511
  4,698
  4,897
  5,108
  5,332
  5,569
  5,820
  6,084
  6,364
  6,659
  6,970
  7,298
  7,643
  8,007
  8,391
  8,794
  9,218
  9,665
  10,134
Total liabilities and equity, $m
  4,539
  4,489
  4,592
  4,711
  4,843
  4,990
  5,151
  5,326
  5,516
  5,721
  5,940
  6,175
  6,426
  6,692
  6,976
  7,276
  7,595
  7,933
  8,290
  8,667
  9,066
  9,486
  9,929
  10,396
  10,888
  11,406
  11,953
  12,527
  13,131
  13,768
  14,436
Debt-to-equity ratio
  0.380
  0.400
  0.400
  0.400
  0.400
  0.400
  0.400
  0.400
  0.400
  0.400
  0.400
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.420
  0.420
  0.420
  0.420
Adjusted equity ratio
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  265
  227
  232
  239
  246
  253
  262
  272
  282
  294
  306
  320
  334
  349
  366
  383
  402
  422
  443
  465
  488
  513
  540
  568
  597
  628
  661
  696
  733
  771
  812
Depreciation, amort., depletion, $m
  169
  172
  176
  181
  186
  191
  197
  204
  211
  219
  228
  237
  246
  257
  267
  279
  291
  304
  318
  332
  348
  364
  381
  399
  417
  437
  458
  480
  503
  528
  553
Funds from operations, $m
  758
  399
  409
  419
  431
  445
  460
  476
  494
  513
  534
  556
  580
  606
  633
  662
  693
  726
  760
  797
  836
  877
  920
  966
  1,015
  1,066
  1,119
  1,176
  1,236
  1,299
  1,365
Change in working capital, $m
  133
  4
  5
  5
  6
  7
  7
  8
  9
  9
  10
  11
  11
  12
  13
  14
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  25
  26
  27
  29
  30
Cash from operations, $m
  625
  395
  404
  414
  425
  438
  452
  468
  485
  504
  524
  546
  569
  594
  620
  649
  679
  710
  744
  780
  818
  858
  900
  945
  992
  1,042
  1,095
  1,150
  1,209
  1,270
  1,335
Maintenance CAPEX, $m
  0
  -169
  -172
  -176
  -181
  -186
  -191
  -197
  -204
  -211
  -219
  -228
  -237
  -246
  -257
  -267
  -279
  -291
  -304
  -318
  -332
  -348
  -364
  -381
  -399
  -417
  -437
  -458
  -480
  -503
  -528
New CAPEX, $m
  -224
  -83
  -97
  -111
  -125
  -138
  -152
  -165
  -179
  -193
  -207
  -221
  -236
  -252
  -267
  -284
  -301
  -318
  -337
  -356
  -376
  -396
  -418
  -441
  -464
  -489
  -515
  -542
  -570
  -600
  -631
Cash from investing activities, $m
  -203
  -252
  -269
  -287
  -306
  -324
  -343
  -362
  -383
  -404
  -426
  -449
  -473
  -498
  -524
  -551
  -580
  -609
  -641
  -674
  -708
  -744
  -782
  -822
  -863
  -906
  -952
  -1,000
  -1,050
  -1,103
  -1,159
Free cash flow, $m
  422
  143
  134
  126
  120
  114
  109
  105
  102
  100
  98
  96
  96
  96
  96
  97
  99
  101
  103
  106
  110
  114
  119
  124
  130
  136
  143
  150
  158
  167
  176
Issuance/(repayment) of debt, $m
  -382
  28
  31
  35
  39
  44
  48
  52
  57
  61
  65
  70
  75
  80
  85
  90
  95
  101
  106
  112
  119
  125
  132
  139
  147
  154
  163
  171
  180
  190
  199
Issuance/(repurchase) of shares, $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
Cash from financing (excl. dividends), $m  
  -369
  28
  31
  35
  39
  44
  48
  52
  57
  61
  65
  70
  75
  80
  85
  90
  95
  101
  106
  112
  119
  125
  132
  139
  147
  154
  163
  171
  180
  190
  199
Total cash flow (excl. dividends), $m
  53
  171
  165
  162
  159
  158
  157
  157
  159
  160
  163
  166
  171
  175
  181
  187
  194
  201
  210
  219
  229
  239
  251
  263
  276
  290
  305
  321
  338
  357
  376
Retained Cash Flow (-), $m
  -283
  -66
  -72
  -83
  -93
  -103
  -113
  -123
  -133
  -144
  -154
  -165
  -176
  -187
  -199
  -211
  -224
  -237
  -251
  -265
  -280
  -295
  -311
  -328
  -345
  -364
  -383
  -403
  -424
  -446
  -470
Prev. year cash balance distribution, $m
 
  145
  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
 
  250
  93
  79
  66
  55
  44
  34
  25
  17
  9
  2
  -5
  -12
  -18
  -24
  -30
  -36
  -41
  -46
  -51
  -56
  -60
  -65
  -69
  -73
  -78
  -82
  -86
  -90
  -94
Discount rate, %
 
  4.90
  5.15
  5.40
  5.67
  5.96
  6.25
  6.57
  6.89
  7.24
  7.60
  7.98
  8.38
  8.80
  9.24
  9.70
  10.19
  10.70
  11.23
  11.79
  12.38
  13.00
  13.65
  14.33
  15.05
  15.80
  16.59
  17.42
  18.29
  19.21
  20.17
PV of cash for distribution, $m
 
  238
  84
  67
  53
  41
  31
  22
  15
  9
  4
  1
  -2
  -4
  -5
  -6
  -6
  -6
  -6
  -6
  -5
  -4
  -4
  -3
  -2
  -2
  -1
  -1
  -1
  -1
  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

Atwood Oceanics, Inc. is an offshore drilling company engaged in the drilling and completion of exploration and development wells for the global oil and gas industry. The Company owns various types of drilling rigs, such as Ultra-Deepwater Rigs, Deepwater Semisubmersibles and Jackups. Its Ultra-deepwater Rigs and Deepwater Semisubmersibles include Atwood Achiever, Atwood Archer, Atwood Admiral, Atwood Advantage, Atwood Condor, Atwood Eagle and Atwood Osprey. Its Jackup Rigs included Atwood Mako, Atwood Manta, Atwood Aurora, Atwood Beacon and Atwood Orca. The Atwood Mako and Atwood Manta, both approximately 400-foot water depth Pacific Class jackup rigs, are operating offshore Vietnam and offshore Thailand. The Atwood Aurora, an approximately 350-foot water depth jackup, is operating offshore West Africa. The Atwood Beacon, an approximately 400-foot water depth jackup, is operating in the Mediterranean Sea.

FINANCIAL RATIOS  of  Atwood Oceanics (ATW)

Valuation Ratios
P/E Ratio 2.3
Price to Sales 0.6
Price to Book 0.2
Price to Tangible Book
Price to Cash Flow 1
Price to Free Cash Flow 1.5
Growth Rates
Sales Growth Rate -26.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -50.4%
Cap. Spend. - 3 Yr. Gr. Rate -21.4%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 38%
Total Debt to Equity 38%
Interest Coverage 6
Management Effectiveness
Return On Assets 6.9%
Ret/ On Assets - 3 Yr. Avg. 8.7%
Return On Total Capital 5.8%
Ret/ On T. Cap. - 3 Yr. Avg. 8.1%
Return On Equity 8.6%
Return On Equity - 3 Yr. Avg. 12.9%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 60.1%
Gross Margin - 3 Yr. Avg. 57.4%
EBITDA Margin 53.9%
EBITDA Margin - 3 Yr. Avg. 51.5%
Operating Margin 35.7%
Oper. Margin - 3 Yr. Avg. 37.1%
Pre-Tax Margin 30.7%
Pre-Tax Margin - 3 Yr. Avg. 32.9%
Net Profit Margin 26%
Net Profit Margin - 3 Yr. Avg. 28.7%
Effective Tax Rate 15.3%
Eff/ Tax Rate - 3 Yr. Avg. 13%
Payout Ratio 8.3%

ATW stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ATW stock intrinsic value calculation we used $1021 million for the last fiscal year's total revenue generated by Atwood Oceanics. The default revenue input number comes from 2016 income statement of Atwood Oceanics. 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 ATW stock valuation model: a) initial revenue growth rate of 2% 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 4.9%, whose default value for ATW is calculated based on our internal credit rating of Atwood Oceanics, 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 Atwood Oceanics.
    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 ATW stock the variable cost ratio is equal to 55.2%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $95 million in the base year in the intrinsic value calculation for ATW 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 4.7% for Atwood Oceanics.

Corporate tax rate of 27% is the nominal tax rate for Atwood Oceanics. 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 ATW 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 ATW are equal to 406.5%.

Life of production assets of 24.6 years is the average useful life of capital assets used in Atwood Oceanics 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 ATW is equal to 19.5%. 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 - $3230 million for Atwood Oceanics - 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 79.486 million for Atwood Oceanics 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 Atwood Oceanics at the current share price and the inputted number of shares is $0.7 billion.

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Financial statements of ATW
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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