Intrinsic value of Cypress Energy Partners - CELP

Previous Close

$8.20

  Intrinsic Value

$1.14

stock screener

  Rating & Target

str. sell

-86%

  Value-price divergence*

-3%

Previous close

$8.20

 
Intrinsic value

$1.14

 
Up/down potential

-86%

 
Rating

str. sell

 
Value-price divergence*

-3%

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

We calculate the intrinsic value of CELP 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 0.1

 

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, %
  -19.68
  4.20
  4.28
  4.35
  4.42
  4.48
  4.53
  4.57
  4.62
  4.66
  4.69
  4.72
  4.75
  4.77
  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
  4.95
  4.95
  4.96
  4.96
Revenue, $m
  298
  311
  324
  338
  353
  369
  385
  403
  422
  441
  462
  484
  507
  531
  556
  583
  611
  641
  672
  705
  739
  776
  814
  854
  896
  940
  987
  1,035
  1,087
  1,141
  1,197
Variable operating expenses, $m
 
  263
  274
  286
  298
  312
  325
  340
  356
  372
  389
  401
  420
  441
  462
  484
  507
  532
  558
  585
  614
  644
  675
  709
  743
  780
  819
  859
  902
  946
  993
Fixed operating expenses, $m
 
  49
  50
  52
  53
  54
  56
  57
  58
  60
  61
  63
  65
  66
  68
  70
  71
  73
  75
  77
  79
  81
  83
  85
  87
  89
  91
  93
  96
  98
  101
Total operating expenses, $m
  300
  312
  324
  338
  351
  366
  381
  397
  414
  432
  450
  464
  485
  507
  530
  554
  578
  605
  633
  662
  693
  725
  758
  794
  830
  869
  910
  952
  998
  1,044
  1,094
Operating income, $m
  -2
  -2
  -1
  0
  1
  3
  4
  6
  8
  9
  11
  19
  22
  24
  27
  30
  33
  36
  39
  43
  47
  51
  56
  61
  66
  71
  77
  83
  89
  96
  103
EBITDA, $m
  4
  6
  8
  9
  10
  12
  13
  15
  17
  19
  21
  24
  26
  29
  32
  35
  38
  42
  45
  49
  54
  58
  63
  68
  73
  79
  85
  92
  99
  106
  113
Interest expense (income), $m
  6
  6
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
  13
  14
  14
  15
  16
  17
  18
  19
  20
  21
Earnings before tax, $m
  -8
  -8
  -6
  -5
  -4
  -3
  -2
  -1
  1
  2
  4
  11
  13
  15
  18
  20
  23
  25
  28
  31
  35
  38
  42
  46
  50
  55
  60
  65
  70
  76
  82
Tax expense, $m
  1
  0
  0
  0
  0
  0
  0
  0
  0
  1
  1
  3
  4
  4
  5
  5
  6
  7
  8
  8
  9
  10
  11
  12
  14
  15
  16
  18
  19
  21
  22
Net income, $m
  2
  -8
  -6
  -5
  -4
  -3
  -2
  -1
  1
  2
  3
  8
  10
  11
  13
  15
  16
  18
  21
  23
  25
  28
  31
  34
  37
  40
  44
  47
  51
  56
  60

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  27
  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
  168
  147
  153
  160
  167
  174
  182
  191
  199
  209
  219
  229
  240
  251
  263
  276
  289
  303
  318
  334
  350
  367
  385
  404
  424
  445
  467
  490
  514
  540
  567
Adjusted assets (=assets-cash), $m
  141
  147
  153
  160
  167
  174
  182
  191
  199
  209
  219
  229
  240
  251
  263
  276
  289
  303
  318
  334
  350
  367
  385
  404
  424
  445
  467
  490
  514
  540
  567
Revenue / Adjusted assets
  2.113
  2.116
  2.118
  2.113
  2.114
  2.121
  2.115
  2.110
  2.121
  2.110
  2.110
  2.114
  2.113
  2.116
  2.114
  2.112
  2.114
  2.116
  2.113
  2.111
  2.111
  2.114
  2.114
  2.114
  2.113
  2.112
  2.113
  2.112
  2.115
  2.113
  2.111
Average production assets, $m
  48
  49
  51
  54
  56
  59
  61
  64
  67
  70
  73
  77
  81
  84
  88
  93
  97
  102
  107
  112
  118
  123
  129
  136
  142
  149
  157
  165
  173
  181
  190
Working capital, $m
  54
  28
  29
  31
  32
  34
  35
  37
  38
  40
  42
  44
  46
  48
  51
  53
  56
  58
  61
  64
  67
  71
  74
  78
  82
  86
  90
  94
  99
  104
  109
Total debt, $m
  136
  114
  120
  126
  132
  139
  146
  154
  162
  170
  179
  188
  198
  208
  219
  230
  242
  255
  268
  282
  297
  312
  329
  346
  364
  382
  402
  423
  445
  468
  492
Total liabilities, $m
  153
  132
  138
  144
  150
  157
  164
  172
  180
  188
  197
  206
  216
  226
  237
  248
  260
  273
  286
  300
  315
  330
  347
  364
  382
  400
  420
  441
  463
  486
  510
Total equity, $m
  14
  15
  15
  16
  17
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  28
  29
  30
  32
  33
  35
  37
  39
  40
  42
  44
  47
  49
  51
  54
  57
Total liabilities and equity, $m
  167
  147
  153
  160
  167
  174
  182
  191
  200
  209
  219
  229
  240
  251
  263
  276
  289
  303
  318
  333
  350
  367
  386
  404
  424
  444
  467
  490
  514
  540
  567
Debt-to-equity ratio
  9.714
  7.780
  7.830
  7.870
  7.920
  7.970
  8.010
  8.060
  8.100
  8.140
  8.180
  8.210
  8.250
  8.280
  8.320
  8.350
  8.380
  8.410
  8.430
  8.460
  8.490
  8.510
  8.530
  8.550
  8.580
  8.600
  8.610
  8.630
  8.650
  8.670
  8.680
Adjusted equity ratio
  -0.092
  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
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  2
  -8
  -6
  -5
  -4
  -3
  -2
  -1
  1
  2
  3
  8
  10
  11
  13
  15
  16
  18
  21
  23
  25
  28
  31
  34
  37
  40
  44
  47
  51
  56
  60
Depreciation, amort., depletion, $m
  6
  8
  9
  9
  9
  9
  9
  9
  9
  10
  10
  4
  4
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
Funds from operations, $m
  37
  0
  2
  3
  5
  6
  7
  9
  10
  11
  13
  13
  14
  16
  18
  20
  22
  24
  27
  29
  32
  35
  38
  41
  45
  48
  52
  57
  61
  66
  71
Change in working capital, $m
  12
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
Cash from operations, $m
  25
  -1
  1
  2
  3
  4
  6
  7
  8
  9
  11
  11
  12
  14
  15
  17
  19
  21
  24
  26
  29
  31
  34
  38
  41
  44
  48
  52
  56
  61
  66
Maintenance CAPEX, $m
  0
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
New CAPEX, $m
  -1
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
Cash from investing activities, $m
  -1
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -9
  -10
  -11
  -11
  -11
  -12
  -13
  -13
  -15
  -15
  -15
  -17
  -17
  -19
  -19
Free cash flow, $m
  24
  -5
  -4
  -3
  -2
  -1
  0
  1
  2
  3
  4
  3
  4
  5
  7
  8
  10
  11
  13
  15
  17
  19
  22
  24
  27
  29
  32
  36
  39
  43
  46
Issuance/(repayment) of debt, $m
  -4
  -22
  6
  6
  6
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
Issuance/(repurchase) of shares, $m
  0
  36
  7
  6
  5
  4
  3
  1
  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  
  -21
  14
  13
  12
  11
  11
  10
  9
  8
  8
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
Total cash flow (excl. dividends), $m
  3
  9
  9
  9
  9
  9
  10
  10
  10
  11
  12
  12
  14
  16
  18
  20
  22
  24
  26
  29
  32
  35
  38
  41
  45
  48
  52
  56
  61
  66
  71
Retained Cash Flow (-), $m
  17
  -36
  -7
  -6
  -5
  -4
  -3
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
Prev. year cash balance distribution, $m
 
  27
  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
  2
  3
  4
  5
  7
  8
  9
  10
  11
  11
  13
  15
  16
  18
  20
  23
  25
  27
  30
  33
  36
  39
  43
  46
  50
  54
  58
  63
  68
Discount rate, %
 
  11.00
  11.55
  12.13
  12.73
  13.37
  14.04
  14.74
  15.48
  16.25
  17.06
  17.92
  18.81
  19.75
  20.74
  21.78
  22.87
  24.01
  25.21
  26.47
  27.80
  29.19
  30.65
  32.18
  33.79
  35.48
  37.25
  39.11
  41.07
  43.12
  45.28
PV of cash for distribution, $m
 
  0
  2
  2
  3
  3
  3
  3
  3
  3
  2
  2
  2
  1
  1
  1
  1
  1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  50.0
  46.9
  44.5
  42.6
  41.3
  40.4
  39.9
  39.8
  39.8
  39.8
  39.8
  39.8
  39.8
  39.8
  39.8
  39.8
  39.8
  39.8
  39.8
  39.8
  39.8
  39.8
  39.8
  39.8
  39.8
  39.8
  39.8
  39.8
  39.8
  39.8

Cypress Energy Partners, L.P. is a limited partnership company, which serves energy companies throughout North America. The Company provides independent pipeline inspection and integrity services to producers and pipeline companies and water and environmental services with salt water disposal (SWD) facilities to the United States onshore oil and natural gas producers and trucking companies. It operates through three segments: Pipeline Inspection Services (PIS), which provides independent inspection services to various energy, public utility and pipeline companies in both the United States and Canada; Integrity Services (IS), which provides hydrostatic testing services to natural gas and petroleum companies and pipeline construction companies of newly constructed and existing natural gas and petroleum pipelines, and Water and Environmental Services (W&ES), which provides SWD services to oil and natural gas producers and trucking companies.

FINANCIAL RATIOS  of  Cypress Energy Partners (CELP)

Valuation Ratios
P/E Ratio 48.6
Price to Sales 0.3
Price to Book 6.9
Price to Tangible Book
Price to Cash Flow 3.9
Price to Free Cash Flow 4.1
Growth Rates
Sales Growth Rate -19.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -50%
Cap. Spend. - 3 Yr. Gr. Rate -24.2%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 971.4%
Total Debt to Equity 971.4%
Interest Coverage 0
Management Effectiveness
Return On Assets 4.9%
Ret/ On Assets - 3 Yr. Avg. 0.2%
Return On Total Capital 1.3%
Ret/ On T. Cap. - 3 Yr. Avg. -4.5%
Return On Equity 8.9%
Return On Equity - 3 Yr. Avg. -11.4%
Asset Turnover 1.7
Profitability Ratios
Gross Margin 11.7%
Gross Margin - 3 Yr. Avg. 12%
EBITDA Margin 1.3%
EBITDA Margin - 3 Yr. Avg. 1.4%
Operating Margin -0.7%
Oper. Margin - 3 Yr. Avg. -0.4%
Pre-Tax Margin -2.7%
Pre-Tax Margin - 3 Yr. Avg. -1.7%
Net Profit Margin 0.7%
Net Profit Margin - 3 Yr. Avg. -1.1%
Effective Tax Rate -12.5%
Eff/ Tax Rate - 3 Yr. Avg. 2.5%
Payout Ratio 0%

CELP stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CELP stock intrinsic value calculation we used $298 million for the last fiscal year's total revenue generated by Cypress Energy Partners. The default revenue input number comes from 2016 income statement of Cypress Energy Partners. 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 CELP stock valuation model: a) initial revenue growth rate of 4.2% 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 11%, whose default value for CELP is calculated based on our internal credit rating of Cypress Energy Partners, 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 Cypress Energy Partners.
    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 CELP stock the variable cost ratio is equal to 84.9%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $48 million in the base year in the intrinsic value calculation for CELP 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 4.4% for Cypress Energy Partners.

Corporate tax rate of 27% is the nominal tax rate for Cypress Energy Partners. 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 CELP 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 CELP are equal to 15.9%.

Life of production assets of 18.1 years is the average useful life of capital assets used in Cypress Energy Partners 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 CELP is equal to 9.1%. 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 - $14 million for Cypress Energy Partners - 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 11.953 million for Cypress Energy Partners 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 Cypress Energy Partners at the current share price and the inputted number of shares is $0.1 billion.

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Financial statements of CELP
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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