Intrinsic value of Exterran - EXTN

Previous Close

$27.91

  Intrinsic Value

$3.99

stock screener

  Rating & Target

str. sell

-86%

  Value-price divergence*

-173%

Previous close

$27.91

 
Intrinsic value

$3.99

 
Up/down potential

-86%

 
Rating

str. sell

 
Value-price divergence*

-173%

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

We calculate the intrinsic value of EXTN 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 1.0

 

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, %
  -42.51
  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
  1,029
  1,050
  1,074
  1,101
  1,132
  1,167
  1,204
  1,245
  1,290
  1,338
  1,389
  1,444
  1,502
  1,565
  1,631
  1,701
  1,776
  1,855
  1,938
  2,027
  2,120
  2,218
  2,322
  2,431
  2,546
  2,667
  2,795
  2,929
  3,070
  3,219
  3,375
Variable operating expenses, $m
 
  916
  937
  961
  988
  1,018
  1,051
  1,087
  1,126
  1,168
  1,212
  1,260
  1,312
  1,366
  1,424
  1,485
  1,550
  1,619
  1,692
  1,769
  1,850
  1,936
  2,027
  2,122
  2,223
  2,328
  2,440
  2,557
  2,680
  2,810
  2,947
Fixed operating expenses, $m
 
  200
  205
  210
  215
  221
  226
  232
  238
  244
  250
  256
  262
  269
  276
  282
  289
  297
  304
  312
  320
  328
  336
  344
  353
  362
  371
  380
  389
  399
  409
Total operating expenses, $m
  1,088
  1,116
  1,142
  1,171
  1,203
  1,239
  1,277
  1,319
  1,364
  1,412
  1,462
  1,516
  1,574
  1,635
  1,700
  1,767
  1,839
  1,916
  1,996
  2,081
  2,170
  2,264
  2,363
  2,466
  2,576
  2,690
  2,811
  2,937
  3,069
  3,209
  3,356
Operating income, $m
  -59
  -67
  -69
  -70
  -71
  -72
  -73
  -74
  -74
  -74
  -73
  -72
  -71
  -70
  -68
  -66
  -64
  -61
  -58
  -54
  -50
  -46
  -41
  -35
  -29
  -23
  -16
  -8
  1
  10
  20
EBITDA, $m
  79
  19
  20
  20
  21
  23
  26
  28
  32
  36
  41
  46
  52
  58
  65
  73
  82
  91
  101
  112
  123
  136
  149
  164
  179
  196
  214
  232
  252
  274
  296
Interest expense (income), $m
  29
  23
  24
  25
  27
  29
  30
  32
  34
  37
  39
  42
  45
  48
  51
  55
  58
  62
  66
  71
  75
  80
  86
  91
  97
  103
  109
  116
  123
  130
  138
Earnings before tax, $m
  -70
  -90
  -93
  -96
  -98
  -101
  -103
  -106
  -108
  -110
  -113
  -114
  -116
  -118
  -120
  -121
  -122
  -123
  -124
  -125
  -126
  -126
  -126
  -126
  -126
  -126
  -125
  -124
  -122
  -120
  -118
Tax expense, $m
  124
  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
  -228
  -90
  -93
  -96
  -98
  -101
  -103
  -106
  -108
  -110
  -113
  -114
  -116
  -118
  -120
  -121
  -122
  -123
  -124
  -125
  -126
  -126
  -126
  -126
  -126
  -126
  -125
  -124
  -122
  -120
  -118

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  36
  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
  1,375
  1,367
  1,398
  1,434
  1,474
  1,519
  1,568
  1,621
  1,679
  1,742
  1,808
  1,880
  1,956
  2,037
  2,124
  2,215
  2,312
  2,415
  2,524
  2,639
  2,760
  2,888
  3,023
  3,165
  3,315
  3,473
  3,639
  3,814
  3,998
  4,191
  4,395
Adjusted assets (=assets-cash), $m
  1,339
  1,367
  1,398
  1,434
  1,474
  1,519
  1,568
  1,621
  1,679
  1,742
  1,808
  1,880
  1,956
  2,037
  2,124
  2,215
  2,312
  2,415
  2,524
  2,639
  2,760
  2,888
  3,023
  3,165
  3,315
  3,473
  3,639
  3,814
  3,998
  4,191
  4,395
Revenue / Adjusted assets
  0.768
  0.768
  0.768
  0.768
  0.768
  0.768
  0.768
  0.768
  0.768
  0.768
  0.768
  0.768
  0.768
  0.768
  0.768
  0.768
  0.768
  0.768
  0.768
  0.768
  0.768
  0.768
  0.768
  0.768
  0.768
  0.768
  0.768
  0.768
  0.768
  0.768
  0.768
Average production assets, $m
  844
  861
  880
  903
  928
  957
  988
  1,021
  1,058
  1,097
  1,139
  1,184
  1,232
  1,283
  1,337
  1,395
  1,456
  1,521
  1,589
  1,662
  1,738
  1,819
  1,904
  1,993
  2,088
  2,187
  2,292
  2,402
  2,518
  2,640
  2,768
Working capital, $m
  178
  145
  148
  152
  156
  161
  166
  172
  178
  185
  192
  199
  207
  216
  225
  235
  245
  256
  267
  280
  293
  306
  320
  335
  351
  368
  386
  404
  424
  444
  466
Total debt, $m
  349
  366
  385
  407
  432
  459
  489
  522
  557
  595
  636
  680
  726
  776
  829
  885
  944
  1,007
  1,073
  1,143
  1,217
  1,296
  1,378
  1,465
  1,556
  1,653
  1,754
  1,861
  1,974
  2,092
  2,216
Total liabilities, $m
  818
  835
  854
  876
  901
  928
  958
  991
  1,026
  1,064
  1,105
  1,149
  1,195
  1,245
  1,298
  1,354
  1,413
  1,476
  1,542
  1,612
  1,686
  1,765
  1,847
  1,934
  2,025
  2,122
  2,223
  2,330
  2,443
  2,561
  2,685
Total equity, $m
  557
  532
  544
  558
  574
  591
  610
  631
  653
  677
  703
  731
  761
  793
  826
  862
  900
  940
  982
  1,026
  1,074
  1,123
  1,176
  1,231
  1,289
  1,351
  1,416
  1,484
  1,555
  1,630
  1,710
Total liabilities and equity, $m
  1,375
  1,367
  1,398
  1,434
  1,475
  1,519
  1,568
  1,622
  1,679
  1,741
  1,808
  1,880
  1,956
  2,038
  2,124
  2,216
  2,313
  2,416
  2,524
  2,638
  2,760
  2,888
  3,023
  3,165
  3,314
  3,473
  3,639
  3,814
  3,998
  4,191
  4,395
Debt-to-equity ratio
  0.627
  0.690
  0.710
  0.730
  0.750
  0.780
  0.800
  0.830
  0.850
  0.880
  0.900
  0.930
  0.950
  0.980
  1.000
  1.030
  1.050
  1.070
  1.090
  1.110
  1.130
  1.150
  1.170
  1.190
  1.210
  1.220
  1.240
  1.250
  1.270
  1.280
  1.300
Adjusted equity ratio
  0.389
  0.389
  0.389
  0.389
  0.389
  0.389
  0.389
  0.389
  0.389
  0.389
  0.389
  0.389
  0.389
  0.389
  0.389
  0.389
  0.389
  0.389
  0.389
  0.389
  0.389
  0.389
  0.389
  0.389
  0.389
  0.389
  0.389
  0.389
  0.389
  0.389
  0.389

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -228
  -90
  -93
  -96
  -98
  -101
  -103
  -106
  -108
  -110
  -113
  -114
  -116
  -118
  -120
  -121
  -122
  -123
  -124
  -125
  -126
  -126
  -126
  -126
  -126
  -126
  -125
  -124
  -122
  -120
  -118
Depreciation, amort., depletion, $m
  138
  86
  88
  90
  93
  96
  99
  102
  106
  110
  114
  118
  123
  128
  134
  140
  146
  152
  159
  166
  174
  182
  190
  199
  209
  219
  229
  240
  252
  264
  277
Funds from operations, $m
  502
  -4
  -5
  -5
  -5
  -5
  -5
  -4
  -2
  -1
  1
  4
  7
  10
  14
  18
  23
  29
  35
  41
  48
  56
  64
  73
  83
  93
  104
  117
  130
  143
  158
Change in working capital, $m
  239
  3
  3
  4
  4
  5
  5
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
  11
  12
  12
  13
  14
  14
  15
  16
  17
  18
  19
  20
  21
  22
Cash from operations, $m
  263
  -6
  -8
  -9
  -10
  -10
  -10
  -9
  -9
  -7
  -6
  -4
  -1
  2
  5
  9
  13
  18
  23
  29
  35
  42
  50
  58
  67
  76
  87
  98
  110
  123
  137
Maintenance CAPEX, $m
  0
  -84
  -86
  -88
  -90
  -93
  -96
  -99
  -102
  -106
  -110
  -114
  -118
  -123
  -128
  -134
  -140
  -146
  -152
  -159
  -166
  -174
  -182
  -190
  -199
  -209
  -219
  -229
  -240
  -252
  -264
New CAPEX, $m
  -74
  -17
  -20
  -23
  -25
  -28
  -31
  -34
  -36
  -39
  -42
  -45
  -48
  -51
  -54
  -58
  -61
  -65
  -68
  -72
  -76
  -81
  -85
  -90
  -94
  -99
  -105
  -110
  -116
  -122
  -128
Cash from investing activities, $m
  -24
  -101
  -106
  -111
  -115
  -121
  -127
  -133
  -138
  -145
  -152
  -159
  -166
  -174
  -182
  -192
  -201
  -211
  -220
  -231
  -242
  -255
  -267
  -280
  -293
  -308
  -324
  -339
  -356
  -374
  -392
Free cash flow, $m
  239
  -108
  -114
  -120
  -125
  -131
  -136
  -142
  -147
  -152
  -157
  -163
  -168
  -173
  -178
  -183
  -188
  -193
  -198
  -202
  -207
  -212
  -217
  -222
  -227
  -232
  -237
  -241
  -246
  -251
  -255
Issuance/(repayment) of debt, $m
  -180
  17
  19
  22
  25
  27
  30
  33
  35
  38
  41
  44
  47
  50
  53
  56
  59
  63
  66
  70
  74
  78
  82
  87
  92
  96
  102
  107
  112
  118
  124
Issuance/(repurchase) of shares, $m
  -1
  100
  105
  110
  114
  118
  123
  127
  131
  135
  139
  142
  146
  150
  153
  157
  160
  163
  167
  170
  173
  176
  179
  182
  184
  187
  189
  192
  194
  196
  198
Cash from financing (excl. dividends), $m  
  -231
  117
  124
  132
  139
  145
  153
  160
  166
  173
  180
  186
  193
  200
  206
  213
  219
  226
  233
  240
  247
  254
  261
  269
  276
  283
  291
  299
  306
  314
  322
Total cash flow (excl. dividends), $m
  7
  9
  10
  12
  13
  15
  16
  17
  19
  20
  22
  23
  25
  27
  28
  30
  32
  34
  36
  38
  40
  42
  44
  47
  49
  52
  54
  57
  60
  63
  67
Retained Cash Flow (-), $m
  249
  -100
  -105
  -110
  -114
  -118
  -123
  -127
  -131
  -135
  -139
  -142
  -146
  -150
  -153
  -157
  -160
  -163
  -167
  -170
  -173
  -176
  -179
  -182
  -184
  -187
  -189
  -192
  -194
  -196
  -198
Prev. year cash balance distribution, $m
 
  36
  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
 
  -55
  -95
  -98
  -101
  -104
  -107
  -109
  -112
  -114
  -117
  -119
  -121
  -123
  -125
  -127
  -128
  -130
  -131
  -132
  -133
  -134
  -135
  -135
  -135
  -135
  -135
  -134
  -134
  -132
  -131
Discount rate, %
 
  7.70
  8.09
  8.49
  8.91
  9.36
  9.83
  10.32
  10.83
  11.38
  11.95
  12.54
  13.17
  13.83
  14.52
  15.25
  16.01
  16.81
  17.65
  18.53
  19.46
  20.43
  21.45
  22.52
  23.65
  24.83
  26.07
  27.38
  28.75
  30.18
  31.69
PV of cash for distribution, $m
 
  -51
  -81
  -77
  -72
  -66
  -61
  -55
  -49
  -43
  -38
  -32
  -27
  -23
  -19
  -15
  -12
  -9
  -7
  -5
  -4
  -3
  -2
  -1
  -1
  -1
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  90.1
  81.0
  72.6
  65.0
  58.2
  52.0
  46.5
  41.6
  37.2
  33.3
  29.8
  26.8
  24.1
  21.7
  19.6
  17.7
  16.0
  14.5
  13.2
  12.1
  11.0
  10.1
  9.3
  8.6
  7.9
  7.3
  6.8
  6.3
  5.9
  5.5

Exterran Corporation engages in the compression, production, and processing of various products and services for the oil and natural gas industry worldwide. The company operates through three segments: Contract Operations, Aftermarket Services, and Product Sales. The Contract Operations segment provides contract operations services, including provision of personnel, equipment, tools, materials, and supplies. The Aftermarket Services segment sells parts and components; and provides operation, maintenance, overhaul, and reconfiguration services, as well as integrated infrastructure solutions. The Product Sales segment designs, engineers, manufactures, sells, and installs a range of oil and natural gas production and processing equipment designed to heat, separate, dehydrate, and condition crude oil and natural gas. Its products include line heaters, oil and natural gas separators, glycol dehydration units, condensate stabilizers, dew point control plants, water treatment, mechanical refrigeration, and cryogenic plants and skid-mounted production packages designed for onshore and offshore production facilities. This segment also sells custom-engineered and built-to-specification production and processing equipment, including designing facilities. In addition, it provides engineering, procurement, and manufacturing services related to the manufacture of critical process equipment for refinery and petrochemical facilities, tanks for tank farms and evaporators, and brine heaters for desalination plants. The company was founded in 2007 and is headquartered in Houston, Texas.

FINANCIAL RATIOS  of  Exterran (EXTN)

Valuation Ratios
P/E Ratio -4.3
Price to Sales 1
Price to Book 1.8
Price to Tangible Book
Price to Cash Flow 3.8
Price to Free Cash Flow 5.2
Growth Rates
Sales Growth Rate -42.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -52.9%
Cap. Spend. - 3 Yr. Gr. Rate -5.8%
Financial Strength
Quick Ratio NaN
Current Ratio 0.2
LT Debt to Equity 62.7%
Total Debt to Equity 62.7%
Interest Coverage -1
Management Effectiveness
Return On Assets -9.3%
Ret/ On Assets - 3 Yr. Avg. -0.9%
Return On Total Capital -20.4%
Ret/ On T. Cap. - 3 Yr. Avg. -3.4%
Return On Equity -33.5%
Return On Equity - 3 Yr. Avg. -7.6%
Asset Turnover 0.7
Profitability Ratios
Gross Margin 29.8%
Gross Margin - 3 Yr. Avg. 27.5%
EBITDA Margin 9.4%
EBITDA Margin - 3 Yr. Avg. 11%
Operating Margin -5.7%
Oper. Margin - 3 Yr. Avg. 0.7%
Pre-Tax Margin -6.8%
Pre-Tax Margin - 3 Yr. Avg. -0%
Net Profit Margin -22.2%
Net Profit Margin - 3 Yr. Avg. -5.1%
Effective Tax Rate -177.1%
Eff/ Tax Rate - 3 Yr. Avg. 79.9%
Payout Ratio 0%

EXTN stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the EXTN stock intrinsic value calculation we used $1029 million for the last fiscal year's total revenue generated by Exterran. The default revenue input number comes from 2016 income statement of Exterran. 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 EXTN 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 7.7%, whose default value for EXTN is calculated based on our internal credit rating of Exterran, 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 Exterran.
    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 EXTN stock the variable cost ratio is equal to 87.3%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $195 million in the base year in the intrinsic value calculation for EXTN 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 6.6% for Exterran.

Corporate tax rate of 27% is the nominal tax rate for Exterran. 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 EXTN 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 EXTN are equal to 82%.

Life of production assets of 10 years is the average useful life of capital assets used in Exterran 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 EXTN is equal to 13.8%. 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 - $557 million for Exterran - 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 34.917 million for Exterran 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 Exterran at the current share price and the inputted number of shares is $1.0 billion.

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Stock chart of EXTN Financial statements of EXTN Annual reports of EXTN
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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