Intrinsic value of Gulf Island Fabrication - GIFI

Previous Close

$12.20

  Intrinsic Value

$4.33

stock screener

  Rating & Target

str. sell

-65%

  Value-price divergence*

-21%

Previous close

$12.20

 
Intrinsic value

$4.33

 
Up/down potential

-65%

 
Rating

str. sell

 
Value-price divergence*

-21%

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

We calculate the intrinsic value of GIFI 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 0.2

 

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, %
  -6.54
  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
  286
  292
  298
  306
  315
  324
  335
  346
  358
  372
  386
  401
  418
  435
  453
  473
  494
  516
  539
  563
  589
  616
  645
  676
  708
  741
  777
  814
  853
  895
  938
Variable operating expenses, $m
 
  328
  336
  345
  354
  365
  377
  390
  404
  419
  435
  452
  470
  490
  510
  532
  556
  581
  607
  634
  663
  694
  727
  761
  797
  835
  875
  917
  961
  1,007
  1,056
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
  281
  328
  336
  345
  354
  365
  377
  390
  404
  419
  435
  452
  470
  490
  510
  532
  556
  581
  607
  634
  663
  694
  727
  761
  797
  835
  875
  917
  961
  1,007
  1,056
Operating income, $m
  5
  -37
  -38
  -39
  -40
  -41
  -42
  -44
  -45
  -47
  -49
  -51
  -53
  -55
  -57
  -60
  -62
  -65
  -68
  -71
  -74
  -78
  -81
  -85
  -89
  -93
  -98
  -103
  -108
  -113
  -118
EBITDA, $m
  30
  -11
  -11
  -12
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -21
  -21
  -22
  -23
  -25
  -26
  -27
  -28
  -30
  -31
  -33
  -34
  -36
Interest expense (income), $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
  4
Earnings before tax, $m
  6
  -37
  -38
  -39
  -40
  -41
  -42
  -44
  -46
  -47
  -49
  -51
  -53
  -56
  -58
  -61
  -64
  -66
  -70
  -73
  -76
  -80
  -84
  -88
  -92
  -96
  -101
  -106
  -111
  -117
  -123
Tax expense, $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
Net income, $m
  4
  -37
  -38
  -39
  -40
  -41
  -42
  -44
  -46
  -47
  -49
  -51
  -53
  -56
  -58
  -61
  -64
  -66
  -70
  -73
  -76
  -80
  -84
  -88
  -92
  -96
  -101
  -106
  -111
  -117
  -123

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  51
  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
  322
  277
  283
  290
  298
  307
  317
  328
  340
  352
  366
  380
  396
  412
  430
  448
  468
  489
  511
  534
  558
  584
  612
  640
  671
  703
  736
  772
  809
  848
  889
Adjusted assets (=assets-cash), $m
  271
  277
  283
  290
  298
  307
  317
  328
  340
  352
  366
  380
  396
  412
  430
  448
  468
  489
  511
  534
  558
  584
  612
  640
  671
  703
  736
  772
  809
  848
  889
Revenue / Adjusted assets
  1.055
  1.054
  1.053
  1.055
  1.057
  1.055
  1.057
  1.055
  1.053
  1.057
  1.055
  1.055
  1.056
  1.056
  1.053
  1.056
  1.056
  1.055
  1.055
  1.054
  1.056
  1.055
  1.054
  1.056
  1.055
  1.054
  1.056
  1.054
  1.054
  1.055
  1.055
Average production assets, $m
  204
  208
  212
  218
  224
  231
  238
  246
  255
  265
  275
  286
  297
  310
  323
  337
  351
  367
  384
  401
  419
  439
  459
  481
  504
  528
  553
  580
  608
  637
  668
Working capital, $m
  78
  27
  28
  29
  30
  30
  31
  33
  34
  35
  36
  38
  39
  41
  43
  44
  46
  48
  51
  53
  55
  58
  61
  64
  67
  70
  73
  77
  80
  84
  88
Total debt, $m
  0
  1
  3
  4
  6
  8
  10
  13
  15
  18
  21
  24
  27
  31
  35
  39
  43
  48
  52
  57
  63
  68
  74
  81
  87
  94
  102
  109
  117
  126
  135
Total liabilities, $m
  59
  60
  62
  63
  65
  67
  69
  72
  74
  77
  80
  83
  86
  90
  94
  98
  102
  107
  111
  116
  122
  127
  133
  140
  146
  153
  161
  168
  176
  185
  194
Total equity, $m
  263
  216
  221
  227
  233
  240
  248
  257
  266
  276
  286
  297
  310
  322
  336
  351
  366
  382
  399
  418
  437
  457
  478
  501
  524
  549
  576
  603
  633
  663
  695
Total liabilities and equity, $m
  322
  276
  283
  290
  298
  307
  317
  329
  340
  353
  366
  380
  396
  412
  430
  449
  468
  489
  510
  534
  559
  584
  611
  641
  670
  702
  737
  771
  809
  848
  889
Debt-to-equity ratio
  0.000
  0.010
  0.010
  0.020
  0.030
  0.030
  0.040
  0.050
  0.060
  0.060
  0.070
  0.080
  0.090
  0.100
  0.100
  0.110
  0.120
  0.120
  0.130
  0.140
  0.140
  0.150
  0.160
  0.160
  0.170
  0.170
  0.180
  0.180
  0.190
  0.190
  0.190
Adjusted equity ratio
  0.782
  0.782
  0.782
  0.782
  0.782
  0.782
  0.782
  0.782
  0.782
  0.782
  0.782
  0.782
  0.782
  0.782
  0.782
  0.782
  0.782
  0.782
  0.782
  0.782
  0.782
  0.782
  0.782
  0.782
  0.782
  0.782
  0.782
  0.782
  0.782
  0.782
  0.782

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  4
  -37
  -38
  -39
  -40
  -41
  -42
  -44
  -46
  -47
  -49
  -51
  -53
  -56
  -58
  -61
  -64
  -66
  -70
  -73
  -76
  -80
  -84
  -88
  -92
  -96
  -101
  -106
  -111
  -117
  -123
Depreciation, amort., depletion, $m
  25
  26
  26
  27
  28
  29
  29
  30
  32
  33
  34
  35
  37
  38
  40
  42
  43
  45
  47
  50
  52
  54
  57
  59
  62
  65
  68
  72
  75
  79
  82
Funds from operations, $m
  0
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -15
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -26
  -27
  -28
  -30
  -31
  -33
  -35
  -36
  -38
  -40
Change in working capital, $m
  -14
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
Cash from operations, $m
  14
  -12
  -12
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -26
  -27
  -28
  -30
  -31
  -33
  -34
  -36
  -38
  -40
  -42
  -44
Maintenance CAPEX, $m
  0
  -25
  -26
  -26
  -27
  -28
  -29
  -29
  -30
  -32
  -33
  -34
  -35
  -37
  -38
  -40
  -42
  -43
  -45
  -47
  -50
  -52
  -54
  -57
  -59
  -62
  -65
  -68
  -72
  -75
  -79
New CAPEX, $m
  -7
  -4
  -5
  -5
  -6
  -7
  -7
  -8
  -9
  -9
  -10
  -11
  -12
  -12
  -13
  -14
  -15
  -16
  -17
  -17
  -18
  -19
  -21
  -22
  -23
  -24
  -25
  -27
  -28
  -29
  -31
Cash from investing activities, $m
  3
  -29
  -31
  -31
  -33
  -35
  -36
  -37
  -39
  -41
  -43
  -45
  -47
  -49
  -51
  -54
  -57
  -59
  -62
  -64
  -68
  -71
  -75
  -79
  -82
  -86
  -90
  -95
  -100
  -104
  -110
Free cash flow, $m
  17
  -41
  -42
  -44
  -46
  -48
  -50
  -52
  -54
  -57
  -60
  -62
  -65
  -68
  -71
  -75
  -78
  -82
  -86
  -90
  -95
  -99
  -104
  -110
  -115
  -121
  -127
  -133
  -140
  -147
  -154
Issuance/(repayment) of debt, $m
  0
  1
  1
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
Issuance/(repurchase) of shares, $m
  0
  41
  43
  44
  46
  48
  50
  52
  55
  57
  60
  63
  66
  69
  72
  75
  79
  83
  87
  91
  95
  100
  105
  110
  116
  121
  127
  134
  140
  147
  155
Cash from financing (excl. dividends), $m  
  0
  42
  44
  46
  48
  50
  52
  54
  58
  60
  63
  66
  69
  73
  76
  79
  83
  88
  92
  96
  100
  106
  111
  116
  123
  128
  134
  142
  148
  156
  164
Total cash flow (excl. dividends), $m
  17
  1
  2
  2
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  9
  10
Retained Cash Flow (-), $m
  -6
  -41
  -43
  -44
  -46
  -48
  -50
  -52
  -55
  -57
  -60
  -63
  -66
  -69
  -72
  -75
  -79
  -83
  -87
  -91
  -95
  -100
  -105
  -110
  -116
  -121
  -127
  -134
  -140
  -147
  -155
Prev. year cash balance distribution, $m
 
  51
  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
 
  11
  -41
  -43
  -44
  -46
  -48
  -50
  -52
  -54
  -57
  -59
  -62
  -65
  -68
  -71
  -74
  -78
  -81
  -85
  -89
  -94
  -98
  -103
  -108
  -114
  -119
  -125
  -131
  -138
  -145
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  11
  -38
  -37
  -36
  -36
  -35
  -34
  -32
  -31
  -30
  -28
  -26
  -25
  -23
  -21
  -19
  -17
  -15
  -13
  -11
  -10
  -8
  -7
  -6
  -4
  -3
  -3
  -2
  -2
  -1
Current shareholders' claim on cash, %
  100
  78.5
  61.3
  47.7
  37.0
  28.7
  22.1
  17.0
  13.1
  10.0
  7.6
  5.8
  4.4
  3.4
  2.6
  1.9
  1.5
  1.1
  0.8
  0.6
  0.5
  0.4
  0.3
  0.2
  0.2
  0.1
  0.1
  0.1
  0.0
  0.0
  0.0

Gulf Island Fabrication, Inc. (Gulf Island) is a holding company. The Company, along with its subsidiaries, is a fabricator of steel platforms and other specialized structures for customers in the offshore oil and gas industry. It also performs onshore and offshore construction and fabrication services for customers in the marine industry. Its primary activity is the fabrication of offshore drilling and production platforms and other steel structures for customers in the oil and gas and marine industries, including jackets and deck sections of fixed production platforms, hull, tendon, and/or deck sections of floating production platforms, piles, wellhead protectors. It conducts its operations through its subsidiaries, which include Gulf Island, L.L.C.; Gulf Marine Fabricators, L.P.; Gulf Island Marine Fabricators, L.L.C.; Gulf Island Shipyards, L.L.C.; Dolphin Services, L.L.C.; and Dolphin Steel Sales, L.L.C.

FINANCIAL RATIOS  of  Gulf Island Fabrication (GIFI)

Valuation Ratios
P/E Ratio 44.8
Price to Sales 0.6
Price to Book 0.7
Price to Tangible Book
Price to Cash Flow 12.8
Price to Free Cash Flow 25.6
Growth Rates
Sales Growth Rate -6.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 16.7%
Cap. Spend. - 3 Yr. Gr. Rate -19.7%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 1.3%
Ret/ On Assets - 3 Yr. Avg. -0.7%
Return On Total Capital 1.5%
Ret/ On T. Cap. - 3 Yr. Avg. -0.8%
Return On Equity 1.5%
Return On Equity - 3 Yr. Avg. -0.8%
Asset Turnover 0.9
Profitability Ratios
Gross Margin 8.7%
Gross Margin - 3 Yr. Avg. 4.2%
EBITDA Margin 10.8%
EBITDA Margin - 3 Yr. Avg. 5.5%
Operating Margin 1.7%
Oper. Margin - 3 Yr. Avg. -2.1%
Pre-Tax Margin 2.1%
Pre-Tax Margin - 3 Yr. Avg. -2%
Net Profit Margin 1.4%
Net Profit Margin - 3 Yr. Avg. -1.3%
Effective Tax Rate 33.3%
Eff/ Tax Rate - 3 Yr. Avg. 35.6%
Payout Ratio 25%

GIFI stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the GIFI stock intrinsic value calculation we used $286 million for the last fiscal year's total revenue generated by Gulf Island Fabrication. The default revenue input number comes from 2016 income statement of Gulf Island Fabrication. 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 GIFI 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 4.3%, whose default value for GIFI is calculated based on our internal credit rating of Gulf Island Fabrication, 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 Gulf Island Fabrication.
    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 GIFI stock the variable cost ratio is equal to 112.6%.

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 GIFI 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 Gulf Island Fabrication.

Corporate tax rate of 27% is the nominal tax rate for Gulf Island Fabrication. 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 GIFI 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 GIFI are equal to 71.2%.

Life of production assets of 8.1 years is the average useful life of capital assets used in Gulf Island Fabrication 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 GIFI is equal to 9.4%. 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 - $263 million for Gulf Island Fabrication - 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 15.192 million for Gulf Island Fabrication 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 Gulf Island Fabrication at the current share price and the inputted number of shares is $0.2 billion.

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COMPANY NEWS

▶ Gulf Island Fabrication posts 2Q loss   [Jul-27-17 10:17PM  Associated Press]
▶ Gulf Island Fabrication, Inc. Announces Contract Award   [Jun-01-17 08:16AM  Business Wire]
▶ Gulf Island Fabrication posts 1Q loss   [Apr-26-17 07:04PM  Associated Press]
▶ Gulf Island Fabrication posts 4Q loss   [Feb-23-17 07:31PM  Associated Press]
▶ [$$] Facebook for Stockpickers   [Dec-24-16 12:01AM  at Barrons.com]
▶ Here is What Hedge Funds Think About Xcel Brands Inc (XELB)   [Dec-02  05:45PM  at Insider Monkey]
▶ Salem Media Group Inc (SALM): Hedge Fund Sentiment Unchanged   [Dec-01  12:18AM  at Insider Monkey]
Financial statements of GIFI
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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