Intrinsic value of Gran Tierra Energy - GTE

Previous Close

$2.14

  Intrinsic Value

$0.47

stock screener

  Rating & Target

str. sell

-78%

  Value-price divergence*

-72%

Previous close

$2.14

 
Intrinsic value

$0.47

 
Up/down potential

-78%

 
Rating

str. sell

 
Value-price divergence*

-72%

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

We calculate the intrinsic value of GTE 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 0.9

 

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, %
  5.42
  60.00
  54.50
  49.55
  45.10
  41.09
  37.48
  34.23
  31.31
  28.68
  26.31
  24.18
  22.26
  20.53
  18.98
  17.58
  16.32
  15.19
  14.17
  13.26
  12.43
  11.69
  11.02
  10.42
  9.87
  9.39
  8.95
  8.55
  8.20
  7.88
  7.59
Revenue, $m
  292
  467
  722
  1,079
  1,566
  2,210
  3,038
  4,078
  5,354
  6,890
  8,702
  10,807
  13,212
  15,925
  18,947
  22,279
  25,916
  29,853
  34,084
  38,601
  43,399
  48,471
  53,812
  59,417
  65,284
  71,413
  77,803
  84,458
  91,382
  98,582
  106,064
Variable operating expenses, $m
 
  1,082
  1,666
  2,486
  3,603
  5,079
  6,979
  9,364
  12,292
  15,814
  19,971
  24,787
  30,305
  36,527
  43,460
  51,102
  59,443
  68,474
  78,178
  88,541
  99,546
  111,180
  123,430
  136,287
  149,744
  163,801
  178,459
  193,724
  209,605
  226,119
  243,283
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
  942
  1,082
  1,666
  2,486
  3,603
  5,079
  6,979
  9,364
  12,292
  15,814
  19,971
  24,787
  30,305
  36,527
  43,460
  51,102
  59,443
  68,474
  78,178
  88,541
  99,546
  111,180
  123,430
  136,287
  149,744
  163,801
  178,459
  193,724
  209,605
  226,119
  243,283
Operating income, $m
  -650
  -615
  -944
  -1,407
  -2,037
  -2,869
  -3,941
  -5,286
  -6,937
  -8,924
  -11,269
  -13,981
  -17,093
  -20,602
  -24,513
  -28,823
  -33,528
  -38,621
  -44,095
  -49,940
  -56,147
  -62,709
  -69,618
  -76,870
  -84,460
  -92,388
  -100,656
  -109,266
  -118,223
  -127,537
  -137,218
EBITDA, $m
  -510
  -534
  -825
  -1,234
  -1,790
  -2,525
  -3,472
  -4,660
  -6,119
  -7,873
  -9,945
  -12,349
  -15,098
  -18,198
  -21,652
  -25,459
  -29,615
  -34,113
  -38,948
  -44,111
  -49,594
  -55,390
  -61,492
  -67,898
  -74,602
  -81,605
  -88,908
  -96,512
  -104,425
  -112,652
  -121,203
Interest expense (income), $m
  6
  12
  30
  56
  93
  143
  210
  295
  402
  534
  692
  879
  1,096
  1,344
  1,623
  1,935
  2,278
  2,653
  3,058
  3,494
  3,960
  4,454
  4,977
  5,527
  6,105
  6,709
  7,341
  7,999
  8,685
  9,399
  10,141
Earnings before tax, $m
  -650
  -627
  -974
  -1,463
  -2,130
  -3,013
  -4,150
  -5,581
  -7,340
  -9,458
  -11,961
  -14,859
  -18,188
  -21,946
  -26,136
  -30,757
  -35,806
  -41,274
  -47,153
  -53,434
  -60,107
  -67,163
  -74,595
  -82,397
  -90,565
  -99,098
  -107,997
  -117,265
  -126,908
  -136,936
  -147,359
Tax expense, $m
  -184
  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
  -466
  -627
  -974
  -1,463
  -2,130
  -3,013
  -4,150
  -5,581
  -7,340
  -9,458
  -11,961
  -14,859
  -18,188
  -21,946
  -26,136
  -30,757
  -35,806
  -41,274
  -47,153
  -53,434
  -60,107
  -67,163
  -74,595
  -82,397
  -90,565
  -99,098
  -107,997
  -117,265
  -126,908
  -136,936
  -147,359

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  25
  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
  1,368
  2,153
  3,326
  4,975
  7,218
  10,183
  14,000
  18,792
  24,675
  31,751
  40,104
  49,800
  60,885
  73,387
  87,316
  102,668
  119,427
  137,570
  157,067
  177,887
  199,997
  223,370
  247,981
  273,812
  300,850
  329,091
  358,539
  389,207
  421,116
  454,293
  488,776
Adjusted assets (=assets-cash), $m
  1,343
  2,153
  3,326
  4,975
  7,218
  10,183
  14,000
  18,792
  24,675
  31,751
  40,104
  49,800
  60,885
  73,387
  87,316
  102,668
  119,427
  137,570
  157,067
  177,887
  199,997
  223,370
  247,981
  273,812
  300,850
  329,091
  358,539
  389,207
  421,116
  454,293
  488,776
Revenue / Adjusted assets
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
Average production assets, $m
  441
  705
  1,090
  1,630
  2,365
  3,337
  4,587
  6,158
  8,085
  10,404
  13,141
  16,318
  19,950
  24,047
  28,611
  33,641
  39,133
  45,078
  51,466
  58,288
  65,533
  73,192
  81,256
  89,720
  98,579
  107,833
  117,483
  127,532
  137,987
  148,858
  160,157
Working capital, $m
  -23
  -47
  -72
  -108
  -157
  -221
  -304
  -408
  -535
  -689
  -870
  -1,081
  -1,321
  -1,592
  -1,895
  -2,228
  -2,592
  -2,985
  -3,408
  -3,860
  -4,340
  -4,847
  -5,381
  -5,942
  -6,528
  -7,141
  -7,780
  -8,446
  -9,138
  -9,858
  -10,606
Total debt, $m
  205
  512
  957
  1,581
  2,432
  3,556
  5,002
  6,818
  9,048
  11,729
  14,895
  18,570
  22,771
  27,510
  32,789
  38,607
  44,959
  51,835
  59,224
  67,115
  75,495
  84,353
  93,681
  103,471
  113,718
  124,421
  135,582
  147,206
  159,299
  171,873
  184,942
Total liabilities, $m
  509
  816
  1,261
  1,885
  2,736
  3,860
  5,306
  7,122
  9,352
  12,033
  15,199
  18,874
  23,075
  27,814
  33,093
  38,911
  45,263
  52,139
  59,528
  67,419
  75,799
  84,657
  93,985
  103,775
  114,022
  124,725
  135,886
  147,510
  159,603
  172,177
  185,246
Total equity, $m
  859
  1,337
  2,066
  3,089
  4,482
  6,324
  8,694
  11,670
  15,323
  19,717
  24,904
  30,926
  37,809
  45,573
  54,223
  63,757
  74,164
  85,431
  97,539
  110,468
  124,198
  138,713
  153,996
  170,037
  186,828
  204,365
  222,653
  241,698
  261,513
  282,116
  303,530
Total liabilities and equity, $m
  1,368
  2,153
  3,327
  4,974
  7,218
  10,184
  14,000
  18,792
  24,675
  31,750
  40,103
  49,800
  60,884
  73,387
  87,316
  102,668
  119,427
  137,570
  157,067
  177,887
  199,997
  223,370
  247,981
  273,812
  300,850
  329,090
  358,539
  389,208
  421,116
  454,293
  488,776
Debt-to-equity ratio
  0.239
  0.380
  0.460
  0.510
  0.540
  0.560
  0.580
  0.580
  0.590
  0.590
  0.600
  0.600
  0.600
  0.600
  0.600
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
Adjusted equity ratio
  0.621
  0.621
  0.621
  0.621
  0.621
  0.621
  0.621
  0.621
  0.621
  0.621
  0.621
  0.621
  0.621
  0.621
  0.621
  0.621
  0.621
  0.621
  0.621
  0.621
  0.621
  0.621
  0.621
  0.621
  0.621
  0.621
  0.621
  0.621
  0.621
  0.621
  0.621

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -466
  -627
  -974
  -1,463
  -2,130
  -3,013
  -4,150
  -5,581
  -7,340
  -9,458
  -11,961
  -14,859
  -18,188
  -21,946
  -26,136
  -30,757
  -35,806
  -41,274
  -47,153
  -53,434
  -60,107
  -67,163
  -74,595
  -82,397
  -90,565
  -99,098
  -107,997
  -117,265
  -126,908
  -136,936
  -147,359
Depreciation, amort., depletion, $m
  140
  81
  119
  173
  247
  344
  469
  626
  819
  1,051
  1,324
  1,632
  1,995
  2,405
  2,861
  3,364
  3,913
  4,508
  5,147
  5,829
  6,553
  7,319
  8,126
  8,972
  9,858
  10,783
  11,748
  12,753
  13,799
  14,886
  16,016
Funds from operations, $m
  93
  -546
  -855
  -1,290
  -1,883
  -2,669
  -3,681
  -4,955
  -6,521
  -8,407
  -10,637
  -13,228
  -16,193
  -19,541
  -23,275
  -27,393
  -31,892
  -36,766
  -42,006
  -47,605
  -53,553
  -59,844
  -66,469
  -73,425
  -80,707
  -88,315
  -96,248
  -104,512
  -113,110
  -122,050
  -131,343
Change in working capital, $m
  0
  -18
  -25
  -36
  -49
  -64
  -83
  -104
  -128
  -154
  -181
  -210
  -241
  -271
  -302
  -333
  -364
  -394
  -423
  -452
  -480
  -507
  -534
  -561
  -587
  -613
  -639
  -665
  -692
  -720
  -748
Cash from operations, $m
  93
  -528
  -830
  -1,254
  -1,834
  -2,604
  -3,599
  -4,851
  -6,393
  -8,254
  -10,455
  -13,017
  -15,953
  -19,270
  -22,973
  -27,060
  -31,529
  -36,372
  -41,583
  -47,153
  -53,074
  -59,337
  -65,935
  -72,864
  -80,120
  -87,702
  -95,609
  -103,846
  -112,417
  -121,330
  -130,595
Maintenance CAPEX, $m
  0
  -44
  -71
  -109
  -163
  -237
  -334
  -459
  -616
  -809
  -1,040
  -1,314
  -1,632
  -1,995
  -2,405
  -2,861
  -3,364
  -3,913
  -4,508
  -5,147
  -5,829
  -6,553
  -7,319
  -8,126
  -8,972
  -9,858
  -10,783
  -11,748
  -12,753
  -13,799
  -14,886
New CAPEX, $m
  -147
  -264
  -384
  -540
  -735
  -972
  -1,251
  -1,570
  -1,928
  -2,318
  -2,737
  -3,177
  -3,632
  -4,096
  -4,564
  -5,030
  -5,492
  -5,945
  -6,389
  -6,822
  -7,245
  -7,659
  -8,064
  -8,464
  -8,859
  -9,254
  -9,649
  -10,049
  -10,455
  -10,871
  -11,299
Cash from investing activities, $m
  -621
  -308
  -455
  -649
  -898
  -1,209
  -1,585
  -2,029
  -2,544
  -3,127
  -3,777
  -4,491
  -5,264
  -6,091
  -6,969
  -7,891
  -8,856
  -9,858
  -10,897
  -11,969
  -13,074
  -14,212
  -15,383
  -16,590
  -17,831
  -19,112
  -20,432
  -21,797
  -23,208
  -24,670
  -26,185
Free cash flow, $m
  -528
  -837
  -1,285
  -1,903
  -2,733
  -3,813
  -5,183
  -6,880
  -8,937
  -11,381
  -14,233
  -17,508
  -21,217
  -25,361
  -29,941
  -34,952
  -40,384
  -46,230
  -52,480
  -59,122
  -66,147
  -73,548
  -81,319
  -89,454
  -97,952
  -106,813
  -116,042
  -125,643
  -135,626
  -146,000
  -156,780
Issuance/(repayment) of debt, $m
  113
  307
  445
  625
  850
  1,124
  1,446
  1,816
  2,230
  2,682
  3,166
  3,675
  4,201
  4,738
  5,279
  5,818
  6,352
  6,876
  7,389
  7,891
  8,380
  8,858
  9,328
  9,790
  10,247
  10,703
  11,161
  11,623
  12,093
  12,574
  13,069
Issuance/(repurchase) of shares, $m
  128
  1,130
  1,703
  2,487
  3,523
  4,854
  6,520
  8,557
  10,993
  13,852
  17,148
  20,881
  25,072
  29,710
  34,786
  40,291
  46,213
  52,541
  59,261
  66,363
  73,838
  81,678
  89,878
  98,437
  107,355
  116,636
  126,284
  136,310
  146,723
  157,539
  168,773
Cash from financing (excl. dividends), $m  
  407
  1,437
  2,148
  3,112
  4,373
  5,978
  7,966
  10,373
  13,223
  16,534
  20,314
  24,556
  29,273
  34,448
  40,065
  46,109
  52,565
  59,417
  66,650
  74,254
  82,218
  90,536
  99,206
  108,227
  117,602
  127,339
  137,445
  147,933
  158,816
  170,113
  181,842
Total cash flow (excl. dividends), $m
  -120
  600
  863
  1,208
  1,641
  2,166
  2,784
  3,493
  4,286
  5,153
  6,081
  7,047
  8,057
  9,086
  10,124
  11,158
  12,181
  13,186
  14,170
  15,132
  16,070
  16,988
  17,887
  18,773
  19,651
  20,526
  21,403
  22,289
  23,191
  24,113
  25,062
Retained Cash Flow (-), $m
  143
  -1,130
  -1,703
  -2,487
  -3,523
  -4,854
  -6,520
  -8,557
  -10,993
  -13,852
  -17,148
  -20,881
  -25,072
  -29,710
  -34,786
  -40,291
  -46,213
  -52,541
  -59,261
  -66,363
  -73,838
  -81,678
  -89,878
  -98,437
  -107,355
  -116,636
  -126,284
  -136,310
  -146,723
  -157,539
  -168,773
Prev. year cash balance distribution, $m
 
  25
  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
 
  -505
  -840
  -1,279
  -1,882
  -2,689
  -3,736
  -5,064
  -6,707
  -8,699
  -11,067
  -13,834
  -17,016
  -20,623
  -24,662
  -29,133
  -34,032
  -39,354
  -45,090
  -51,231
  -57,767
  -64,690
  -71,991
  -79,664
  -87,704
  -96,110
  -104,881
  -114,020
  -123,533
  -133,426
  -143,711
Discount rate, %
 
  4.40
  4.62
  4.85
  5.09
  5.35
  5.62
  5.90
  6.19
  6.50
  6.83
  7.17
  7.53
  7.90
  8.30
  8.71
  9.15
  9.60
  10.08
  10.59
  11.12
  11.67
  12.26
  12.87
  13.51
  14.19
  14.90
  15.64
  16.43
  17.25
  18.11
PV of cash for distribution, $m
 
  -484
  -767
  -1,109
  -1,543
  -2,072
  -2,692
  -3,391
  -4,148
  -4,935
  -5,718
  -6,460
  -7,124
  -7,673
  -8,080
  -8,322
  -8,389
  -8,278
  -7,998
  -7,568
  -7,014
  -6,365
  -5,656
  -4,919
  -4,186
  -3,484
  -2,834
  -2,252
  -1,747
  -1,322
  -974
Current shareholders' claim on cash, %
  100
  42.6
  18.8
  8.5
  4.0
  1.9
  0.9
  0.5
  0.2
  0.1
  0.1
  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
  0.0
  0.0
  0.0
  0.0
  0.0

Gran Tierra Energy Inc., an independent energy company, engages in the acquisition, exploration, development, and production of oil and gas properties in Colombia, Peru, and Brazil. As of December 31, 2015, the company had total proved undeveloped reserves of 7.6 million barrels of oil equivalent (MMBOE), including 5.0 MMBOE in Colombia and 2.6 MMBOE in Brazil. Gran Tierra Energy Inc. was incorporated in 2003 and is headquartered in Calgary, Canada.

FINANCIAL RATIOS  of  Gran Tierra Energy (GTE)

Valuation Ratios
P/E Ratio -1.8
Price to Sales 2.9
Price to Book 1
Price to Tangible Book
Price to Cash Flow 9.2
Price to Free Cash Flow -15.8
Growth Rates
Sales Growth Rate 5.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -6.4%
Cap. Spend. - 3 Yr. Gr. Rate -15.7%
Financial Strength
Quick Ratio NaN
Current Ratio 0.1
LT Debt to Equity 23.9%
Total Debt to Equity 23.9%
Interest Coverage -107
Management Effectiveness
Return On Assets -36.7%
Ret/ On Assets - 3 Yr. Avg. -21.6%
Return On Total Capital -45.1%
Ret/ On T. Cap. - 3 Yr. Avg. -27.1%
Return On Equity -50.1%
Return On Equity - 3 Yr. Avg. -28.7%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 89%
Gross Margin - 3 Yr. Avg. 90.1%
EBITDA Margin -172.6%
EBITDA Margin - 3 Yr. Avg. -70.6%
Operating Margin -222.6%
Oper. Margin - 3 Yr. Avg. -119.5%
Pre-Tax Margin -222.6%
Pre-Tax Margin - 3 Yr. Avg. -119.5%
Net Profit Margin -159.6%
Net Profit Margin - 3 Yr. Avg. -95.6%
Effective Tax Rate 28.3%
Eff/ Tax Rate - 3 Yr. Avg. -230.5%
Payout Ratio 0%

GTE stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the GTE stock intrinsic value calculation we used $292 million for the last fiscal year's total revenue generated by Gran Tierra Energy. The default revenue input number comes from 2016 income statement of Gran Tierra Energy. 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 GTE stock valuation model: a) initial revenue growth rate of 60% 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 4.4%, whose default value for GTE is calculated based on our internal credit rating of Gran Tierra Energy, 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 Gran Tierra Energy.
    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 GTE stock the variable cost ratio is equal to 232.9%.

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 GTE 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 5.9% for Gran Tierra Energy.

Corporate tax rate of 27% is the nominal tax rate for Gran Tierra Energy. 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 GTE 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 GTE are equal to 151%.

Life of production assets of 10 years is the average useful life of capital assets used in Gran Tierra Energy 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 GTE is equal to -10%. 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 - $859 million for Gran Tierra Energy - 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 403.101 million for Gran Tierra Energy 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 Gran Tierra Energy at the current share price and the inputted number of shares is $0.9 billion.

RELATED COMPANIES Price Int.Val. Rating
EC Ecopetrol ADR 9.08 1.76  str.sell
PBR Petroleo Brasi 8.65 3.08  str.sell

COMPANY NEWS

▶ Gran Tierra Energy reports 2Q loss   [Aug-05-17 01:10AM  Associated Press]
▶ 5 Cheap Oil Stocks Under $5   [Jul-01-17 04:01PM  Insider Monkey]
▶ Gran Tierra Energy posts 1Q profit   [May-03-17 06:43PM  Associated Press]
▶ Gran Tierra Energy reports 4Q loss   [06:44AM  Associated Press]
▶ Gran Tierra Energy Inc. (GTE) Hedge Funds Are Snapping Up   [Dec-07-16 02:47AM  at Insider Monkey]
Stock chart of GTE Financial statements of GTE
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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