Intrinsic value of Eco-Stim Energy Solutions - ESES

Previous Close

$1.37

  Intrinsic Value

$0.51

stock screener

  Rating & Target

str. sell

-63%

  Value-price divergence*

0%

Previous close

$1.37

 
Intrinsic value

$0.51

 
Up/down potential

-63%

 
Rating

str. sell

 
Value-price divergence*

0%

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

We calculate the intrinsic value of ESES 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 0.0

 

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, %
  -42.86
  50.00
  45.50
  41.45
  37.81
  34.52
  31.57
  28.91
  26.52
  24.37
  22.43
  20.69
  19.12
  17.71
  16.44
  15.29
  14.27
  13.34
  12.50
  11.75
  11.08
  10.47
  9.92
  9.43
  8.99
  8.59
  8.23
  7.91
  7.62
  7.36
  7.12
Revenue, $m
  8
  12
  17
  25
  34
  46
  60
  78
  98
  122
  150
  181
  215
  253
  295
  340
  388
  440
  495
  553
  615
  679
  747
  817
  890
  967
  1,046
  1,129
  1,215
  1,305
  1,397
Variable operating expenses, $m
 
  8
  11
  15
  21
  29
  38
  49
  61
  76
  94
  113
  134
  158
  184
  212
  243
  275
  310
  346
  384
  424
  467
  511
  556
  604
  654
  706
  759
  815
  873
Fixed operating expenses, $m
 
  17
  18
  18
  19
  19
  20
  20
  21
  21
  22
  22
  23
  23
  24
  25
  25
  26
  27
  27
  28
  29
  29
  30
  31
  32
  32
  33
  34
  35
  36
Total operating expenses, $m
  22
  25
  29
  33
  40
  48
  58
  69
  82
  97
  116
  135
  157
  181
  208
  237
  268
  301
  337
  373
  412
  453
  496
  541
  587
  636
  686
  739
  793
  850
  909
Operating income, $m
  -13
  -13
  -11
  -9
  -6
  -2
  3
  9
  16
  25
  34
  45
  58
  72
  87
  103
  120
  139
  159
  180
  203
  226
  251
  276
  303
  331
  360
  390
  422
  454
  488
EBITDA, $m
  -8
  -13
  -11
  -9
  -6
  -2
  3
  9
  16
  25
  34
  45
  58
  72
  87
  103
  120
  139
  159
  180
  203
  226
  251
  276
  303
  331
  360
  390
  422
  454
  488
Interest expense (income), $m
  3
  3
  4
  7
  10
  14
  19
  25
  33
  42
  52
  64
  77
  92
  108
  126
  146
  167
  189
  213
  238
  264
  292
  321
  351
  383
  416
  450
  486
  523
  561
Earnings before tax, $m
  -18
  -16
  -16
  -16
  -16
  -16
  -16
  -16
  -17
  -17
  -18
  -18
  -19
  -20
  -22
  -23
  -25
  -27
  -30
  -32
  -35
  -38
  -41
  -45
  -48
  -52
  -56
  -60
  -64
  -68
  -73
Tax expense, $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
Net income, $m
  -18
  -16
  -16
  -16
  -16
  -16
  -16
  -16
  -17
  -17
  -18
  -18
  -19
  -20
  -22
  -23
  -25
  -27
  -30
  -32
  -35
  -38
  -41
  -45
  -48
  -52
  -56
  -60
  -64
  -68
  -73

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  2
  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
  47
  67
  98
  139
  191
  257
  338
  436
  552
  687
  841
  1,014
  1,208
  1,422
  1,656
  1,910
  2,182
  2,473
  2,782
  3,109
  3,454
  3,815
  4,194
  4,590
  5,002
  5,432
  5,879
  6,344
  6,827
  7,329
  7,851
Adjusted assets (=assets-cash), $m
  45
  67
  98
  139
  191
  257
  338
  436
  552
  687
  841
  1,014
  1,208
  1,422
  1,656
  1,910
  2,182
  2,473
  2,782
  3,109
  3,454
  3,815
  4,194
  4,590
  5,002
  5,432
  5,879
  6,344
  6,827
  7,329
  7,851
Revenue / Adjusted assets
  0.178
  0.179
  0.173
  0.180
  0.178
  0.179
  0.178
  0.179
  0.178
  0.178
  0.178
  0.179
  0.178
  0.178
  0.178
  0.178
  0.178
  0.178
  0.178
  0.178
  0.178
  0.178
  0.178
  0.178
  0.178
  0.178
  0.178
  0.178
  0.178
  0.178
  0.178
Average production assets, $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
Working capital, $m
  -1
  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 debt, $m
  25
  38
  58
  86
  121
  165
  219
  284
  361
  451
  554
  670
  799
  942
  1,098
  1,267
  1,448
  1,642
  1,849
  2,067
  2,297
  2,538
  2,790
  3,054
  3,329
  3,616
  3,914
  4,224
  4,547
  4,881
  5,229
Total liabilities, $m
  32
  45
  65
  93
  128
  172
  226
  291
  368
  458
  561
  677
  806
  949
  1,105
  1,274
  1,455
  1,649
  1,856
  2,074
  2,304
  2,545
  2,797
  3,061
  3,336
  3,623
  3,921
  4,231
  4,554
  4,888
  5,236
Total equity, $m
  15
  22
  33
  46
  64
  86
  113
  145
  184
  229
  280
  338
  402
  474
  552
  636
  727
  824
  926
  1,035
  1,150
  1,271
  1,397
  1,528
  1,666
  1,809
  1,958
  2,112
  2,273
  2,441
  2,614
Total liabilities and equity, $m
  47
  67
  98
  139
  192
  258
  339
  436
  552
  687
  841
  1,015
  1,208
  1,423
  1,657
  1,910
  2,182
  2,473
  2,782
  3,109
  3,454
  3,816
  4,194
  4,589
  5,002
  5,432
  5,879
  6,343
  6,827
  7,329
  7,850
Debt-to-equity ratio
  1.667
  1.690
  1.790
  1.850
  1.890
  1.920
  1.940
  1.950
  1.960
  1.970
  1.980
  1.980
  1.990
  1.990
  1.990
  1.990
  1.990
  1.990
  2.000
  2.000
  2.000
  2.000
  2.000
  2.000
  2.000
  2.000
  2.000
  2.000
  2.000
  2.000
  2.000
Adjusted equity ratio
  0.333
  0.333
  0.333
  0.333
  0.333
  0.333
  0.333
  0.333
  0.333
  0.333
  0.333
  0.333
  0.333
  0.333
  0.333
  0.333
  0.333
  0.333
  0.333
  0.333
  0.333
  0.333
  0.333
  0.333
  0.333
  0.333
  0.333
  0.333
  0.333
  0.333
  0.333

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -18
  -16
  -16
  -16
  -16
  -16
  -16
  -16
  -17
  -17
  -18
  -18
  -19
  -20
  -22
  -23
  -25
  -27
  -30
  -32
  -35
  -38
  -41
  -45
  -48
  -52
  -56
  -60
  -64
  -68
  -73
Depreciation, amort., depletion, $m
  5
  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
Funds from operations, $m
  2
  -16
  -16
  -16
  -16
  -16
  -16
  -16
  -17
  -17
  -18
  -18
  -19
  -20
  -22
  -23
  -25
  -27
  -30
  -32
  -35
  -38
  -41
  -45
  -48
  -52
  -56
  -60
  -64
  -68
  -73
Change in working capital, $m
  7
  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 operations, $m
  -5
  -16
  -16
  -16
  -16
  -16
  -16
  -16
  -17
  -17
  -18
  -18
  -19
  -20
  -22
  -23
  -25
  -27
  -30
  -32
  -35
  -38
  -41
  -45
  -48
  -52
  -56
  -60
  -64
  -68
  -73
Maintenance CAPEX, $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
New CAPEX, $m
  -5
  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 investing activities, $m
  -5
  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
Free cash flow, $m
  -10
  -16
  -16
  -16
  -16
  -16
  -16
  -16
  -17
  -17
  -18
  -18
  -19
  -20
  -22
  -23
  -25
  -27
  -30
  -32
  -35
  -38
  -41
  -45
  -48
  -52
  -56
  -60
  -64
  -68
  -73
Issuance/(repayment) of debt, $m
  -2
  15
  20
  27
  35
  44
  54
  65
  77
  90
  103
  116
  129
  143
  156
  169
  182
  194
  206
  218
  230
  241
  253
  264
  275
  287
  298
  310
  322
  335
  348
Issuance/(repurchase) of shares, $m
  2
  23
  26
  29
  33
  38
  43
  49
  55
  62
  69
  76
  84
  92
  100
  108
  116
  124
  133
  141
  150
  158
  167
  176
  185
  195
  205
  215
  225
  236
  247
Cash from financing (excl. dividends), $m  
  0
  38
  46
  56
  68
  82
  97
  114
  132
  152
  172
  192
  213
  235
  256
  277
  298
  318
  339
  359
  380
  399
  420
  440
  460
  482
  503
  525
  547
  571
  595
Total cash flow (excl. dividends), $m
  -10
  22
  31
  41
  52
  66
  81
  98
  116
  135
  154
  174
  194
  214
  234
  253
  272
  291
  309
  327
  344
  362
  379
  396
  413
  430
  447
  465
  483
  502
  522
Retained Cash Flow (-), $m
  16
  -23
  -26
  -29
  -33
  -38
  -43
  -49
  -55
  -62
  -69
  -76
  -84
  -92
  -100
  -108
  -116
  -124
  -133
  -141
  -150
  -158
  -167
  -176
  -185
  -195
  -205
  -215
  -225
  -236
  -247
Prev. year cash balance 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
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
 
  -1
  5
  11
  19
  28
  38
  49
  61
  73
  85
  98
  110
  122
  134
  146
  156
  167
  177
  186
  195
  203
  211
  219
  227
  235
  242
  250
  258
  266
  275
Discount rate, %
 
  10.60
  11.13
  11.69
  12.27
  12.88
  13.53
  14.21
  14.92
  15.66
  16.44
  17.27
  18.13
  19.04
  19.99
  20.99
  22.04
  23.14
  24.30
  25.51
  26.79
  28.12
  29.53
  31.01
  32.56
  34.19
  35.90
  37.69
  39.57
  41.55
  43.63
PV of cash for distribution, $m
 
  -1
  4
  8
  12
  15
  18
  19
  20
  20
  19
  17
  15
  13
  10
  8
  6
  5
  4
  2
  2
  1
  1
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  45.2
  23.6
  13.8
  8.8
  6.0
  4.3
  3.2
  2.5
  1.9
  1.6
  1.3
  1.1
  0.9
  0.8
  0.7
  0.6
  0.5
  0.5
  0.4
  0.4
  0.3
  0.3
  0.3
  0.3
  0.2
  0.2
  0.2
  0.2
  0.2
  0.2

Eco-Stim Energy Solutions, Inc. operates as an independent oilfield services company in the United States. It offers well stimulation, coiled tubing, and field management services to the upstream oil and gas industry. The company is headquartered in Houston, Texas.

FINANCIAL RATIOS  of  Eco-Stim Energy Solutions (ESES)

Valuation Ratios
P/E Ratio -1.1
Price to Sales 2.5
Price to Book 1.3
Price to Tangible Book
Price to Cash Flow -4
Price to Free Cash Flow -2
Growth Rates
Sales Growth Rate -42.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -61.5%
Cap. Spend. - 3 Yr. Gr. Rate 20.1%
Financial Strength
Quick Ratio 1
Current Ratio 0
LT Debt to Equity 146.7%
Total Debt to Equity 166.7%
Interest Coverage -5
Management Effectiveness
Return On Assets -27.5%
Ret/ On Assets - 3 Yr. Avg. -23.4%
Return On Total Capital -36.7%
Ret/ On T. Cap. - 3 Yr. Avg. -32%
Return On Equity -78.3%
Return On Equity - 3 Yr. Avg. -87.2%
Asset Turnover 0.1
Profitability Ratios
Gross Margin -25%
Gross Margin - 3 Yr. Avg. -110.7%
EBITDA Margin -125%
EBITDA Margin - 3 Yr. Avg. -258.3%
Operating Margin -175%
Oper. Margin - 3 Yr. Avg. -420.2%
Pre-Tax Margin -225%
Pre-Tax Margin - 3 Yr. Avg. -339.3%
Net Profit Margin -225%
Net Profit Margin - 3 Yr. Avg. -339.3%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio 0%

ESES stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ESES stock intrinsic value calculation we used $8 million for the last fiscal year's total revenue generated by Eco-Stim Energy Solutions. The default revenue input number comes from 2016 income statement of Eco-Stim Energy Solutions. 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 ESES stock valuation model: a) initial revenue growth rate of 50% 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 10.6%, whose default value for ESES is calculated based on our internal credit rating of Eco-Stim Energy Solutions, 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 Eco-Stim Energy Solutions.
    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 ESES stock the variable cost ratio is equal to 62.5%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $17 million in the base year in the intrinsic value calculation for ESES 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 11.5% for Eco-Stim Energy Solutions.

Corporate tax rate of 27% is the nominal tax rate for Eco-Stim Energy Solutions. 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 ESES 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 ESES are equal to 0%.

Life of production assets of 10 years is the average useful life of capital assets used in Eco-Stim Energy Solutions 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 ESES is equal to 0%. 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 - $15 million for Eco-Stim Energy Solutions - 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 13.857 million for Eco-Stim Energy Solutions 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 Eco-Stim Energy Solutions at the current share price and the inputted number of shares is $0.0 billion.

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COMPANY NEWS

▶ Eco-Stim Energy Solutions Announces Private Placement   [Aug-02-17 08:04PM  Marketwired]
▶ Eco-Stim Energy Solutions Provides Operational Update   [Jun-26-17 05:54PM  Marketwired]
▶ These 5 Stocks Under $10 Could Get Hot Soon   [Jan-27-17 12:17PM  TheStreet.com]
▶ Kyle Bass Makes Huge Bet Against McDonalds, Sells Off Clovis   [Sep-06-16 07:58AM  at Insider Monkey]
▶ Kyle Bass Slashes Portfolio to Short the Yuan   [Feb-22-16 12:21PM  at Insider Monkey]
▶ Eco-Stim Energy Solutions Announces Operational Update Call   [Jan-13-16 06:33PM  GlobeNewswire]
Stock chart of ESES Financial statements of ESES
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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